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Nov 19 - 11:55 AM

GBP/USD - COMMENT-UK Rate Variability, COVID, Global Growth Angst Weigh On Sterling

By Paul Spirgel  —  Nov 19 - 10:32 AM

Sterling followed other currencies lower on Friday, dropping 0.35% to 1.3449 in early U.S. trade, hurt by less-hawkish BoE comments nL9N2QP00O, rising European COVID cases and lockdown prospects nL8N2SA2NF and EUR weakness after more inflation patience from ECB president Christine Lagarde nL8N2SA1UE.

But GBP/USD rallied off NorAm session lows by 1.3414 as BoE chief economist Huw Pill's comments appeared less dovish than initially construed when he spoke of the scale, size and timing of hikes.

The market expectation for a 25bp hike in December fell to 49% BOEWATCH from 66% last week, while a 15bp hike is still expected 0#FSS:.

While sterling hovers near 2021 lows recent losses require perspective.
Rates have been the key driver of FX performance in 2021, with currencies of countries seen hiking have out-performed.
Among major currencies, the pound has fallen 1.48% versus the USD in 2021, while the yen has fallen 10.3% and euro 7.4%.

With short-sterling futures indicating 104bps of hikes from Dec 2021 to Dec 2022 and U.S. Eurodollar futures indicating only 66bps of hikes over the same period, it seems likely the pound will regain some vigor versus the USD.

Sterling's 2021 low of 1.3354 hit on Nov.
12 may be the bottom assuming relative interest rate outlooks remain constant.

For more click on FXBUZ

GBP Chart: Click here

Refinitiv IFR Research/Market Commentary


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