Sterling bulls received a slight reprieve on Friday as GBP/USD rebounded after hitting a fresh 2021 low at 1.3354 in overnight trade, though the tepid rise may only offer temporary solace as technical and fundamental factors point to further declines.
Overall, GBP/USD bullish sentiment is on the wane following deterioration of U.S.-UK rate differentials, which had favored sterling gains as futures markets indicated the BoE was on schedule to lift rates ahead of the Fed.
The double whammy of the BoE's hawkish-lite rate hold on Nov.
4, which scaled back 2021 tightening expectations from two hikes to the current coin-toss for a move in December, and lingering post-Brexit trade uncertainties remain hindrance for sterling.
Sterling outperformed early in 2021 but has cratered recently and is now down 2.02% year-to-date and falling 2.18% in November alone, the bulk of which came after the BoE's disappointing hold and higher than expected U.S. CPI data.
With Fed and BoE rate views converging, the near-term GBP/USD outlook remains challenging.
GBP/USD bears target support at the Dec.
22 2020 low of 1.3305 and Dec.
21 trough of 1.3190 as trapped longs look to exit.
GBP/USD's 2021 performance is steadily falling in line with EUR's 6%, and JPY's 10% slides versus the dollar.
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