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Jan 19 - 11:55 AM

GBP/USD - COMMENT-Sterling Bulls May Charge At Fibo Level Again Soon

By Paul Spirgel  —  Jan 19 - 10:15 AM

GBP/USD looks poised to take out its Dec.
14 trend high at 1.2446, courtesy of sticky UK core inflation data and U.S. Eurodollar futures pricing a lower terminal Fed Funds rate.

1.2446 is close to a 61.8% Fibo resistance level of the 2022 fall from 1.3749 to 1.0327, which was threatened after Wednesday's hot UK inflation in services prices data.

Bank of England Governor Andrew Bailey on Thursday noted that the central bank did not push back against market expectations for interest rates to peak at 4.5% in its December policy statement.

Although the BoE's hike path looks less steep than in early November, the pound should remain well bid versus the dollar as futures indicate the Fed will reduce rates at a faster pace than the BoE later this year.
This could leave UK rates with a 50 basis point yield advantage in 2024, which should boost GBP/USD.

Ongoing expectations for Fed rate cuts in the second half of this year come despite recent hawkish Fed member comments.
Several Fed members continue to forecast U.S. rates topping above 5% in 2023 and remaining there. nN9N30X014nW1N32Z008

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Refinitiv IFR Research/Market Commentary


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