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May 25 - 01:55 PM

GBP/USD - COMMENT-Sterling 10-Day Avg Magnetic As UK Data Hints At Bumpy Recovery

By Paul Spirgel  —  May 25 - 11:39 AM

Sterling clung to 10-DMA support at 1.4128 on Tuesday after reversing earlier gains to 1.4211 on disappointing UK May CBI data nL5N2NC2TN, and the weak retail sales data coupled with less-hawkish BoE tones may suggest that the recent bullish run may be faltering.

The drop in retail sales came in stark contrast to recent upbeat UK data releases indicating that the UK recovery was beginning to gain momentum as COVID and Brexit-related growth issues abate.

Monday's BoE speakers nL5N2NB3KT tempered rate and taper views, which had also moved GBP/USD back toward 10-DMA support.
The shallow pullbacks by cable, from highs above 1.4200 in three of the last six trading sessions had indicated an underlying bid.

Today's GBP/USD weakness amid broad USD weakness may suggest that traders are beginning to unwind sterling longs, heeding BoE calls for temperance.
The pound's rise over the last six months may also begin to have deleterious effects on the UK economy as rising export prices may slow the burgeoning recovery, delaying UK asset purchase taper and rate rises.

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Source:
Refinitiv IFR Research/Market Commentary

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