Sterling slipped further away from recent trend highs as traders reacted to less enthusiastic market expectations for a jumbo Fed rate cut this month, which may keep the pound on the back foot as markets await a slew of U.S. and UK data with policy implications for the Fed and BoE.

Sterling's recent rise to 2024 highs at 1.3269 was based on diverging Fed-BoE rate expectations, and though the outlook on rate spreads has not changed much heading toward year-end, the more near-term, September view has seen odds for a supersized cut diminish, which has caused a minor selloff.

It's worth noting that spec futures traders have not gone all-in on the current reversal of more extreme Fed cuts.

Friday's release of IMM spec positioning data indicated a significant rise in GBP long positioning, and though positioning is well below the July 23 all-time high, the sterling spec long has risen in the last few weeks from +47.8k contracts in mid-August to +108k as of Sept.
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With December 2024 UK-US futures strips, and 2025 prices, still indicating more deep Fed cuts, relative to the BoE, the current GBP/USD slide could be transitory barring a more dovish BoE shift.

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