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Aug 19 - 11:55 AM

GBP/USD - COMMENT-Sterling Slides As COVID, Fed Minutes Cast Long Shadow

By Paul Spirgel  —  Aug 19 - 10:34 AM

GBP/USD extended recent losses, trading down 0.55% near its session low 1.3666 on Thursday nL1N2PQ0SF, as resurgent global COVID cases weighed on risk-sensitive sterling while markets also reacted to the previous session's Fed minutes release, which bolstered expectations for tapering of asset purchases to begin in 2021.

Thursday's GBP/USD selloff left it near flat on the year -- (+0.1%) -- with sterling weakness broad-based, falling 0.45% versus EUR and 0.59% versus the yen.
UK short-sterling futures ticked up slightly, indicating markets were shifting UK rate hike bets further out the strip.

But recent GBP/USD weakness may be fleeting as the Fed and BoE are walking parallel paths, with both expected to hike rates in 2022, though futures have been pricing a steeper rise in U.S. rates for months.

GBP/USD finds support at 1.3665, the lower 30-day Bolli and July 20's trend low at 1.3573.

Focus now shifts to Fed Chair Jerome Powell at the Aug 26-28 Jackson Hole Symposium for hints at when Fed asset taper will begin.
With the dollar index up 4.55% from late-May lows, the Fed may be reluctant to appear to hawkish lest the strong dollar choke off recent economic gains.

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GBP Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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