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Sep 20 - 11:55 AM

GBP/USD - COMMENT-Sterling Slides On Broad Risk Selloff And Hawkish BoE Rethink

By Paul Spirgel  —  Sep 20 - 10:17 AM

Sterling fell 0.43% to 1.3668 on Monday in a slide that out-paced other major currencies by a wide margin as markets react to concerns over the solvency of China Evergrande group 3333.HK, ahead of bond payments due later in September, and knock-on effects in China and global financial markets.

The fall followed a spate of weak data that tempered hawkish BoE expectations ahead of Thursday's MPC rate announcement.
Though no rate changes have been expected from the BoE until early 2022 0#BOEWATCH, this week's meeting was seen likely to reveal a rising tide of BoE members voting to begin reducing pandemic-era accommodation.

The previous MPC meeting yielded one vote to begin tapering.
Recent musings by BoE Governor Andrew Bailey indicated that four of the eight voting members had thought conditions had been met to begin hiking rates.
Those hawkish tones have likely been tempered amid the resurgence of COVID's Delta variant cases and slowing economic growth which has helped push GBP/USD further away from its June 1 high at 1.4250.

Monday's dip to four-week lows by 1.3648 opens the way for run at July 20's 1.3573 low and then a series of lows on the way to 100- and 200-DMA support by 1.3240 and 1.3162.

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Refinitiv IFR Research/Market Commentary


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