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Dec 17 - 01:55 PM

GBP/USD - COMMENT-Sterling's Fed, BoE Rally Undone With Risk Off, Techs Capping

By Randolph Donney  —  Dec 17 - 12:07 PM

GBP/USD faltered on Friday, unable to maintain gains from Thursday's slightly surprising BoE rate hike as risk came off the boil and the dollar firmed, with rising in gilt-Treasury yield spreads reflecting a sterling-negative flight into the safety on Treasuries and the dollar.

After Thursday's BoE-induced spike up to 1.33755 ran into sellers by the 61.8% Fibo of the Nov.
18 to Dec.
8 slide, Friday saw strong sellers at the 50% Fibo and daily kijun at 1.3338 send prices down just below the tenkan at 1.3268.

A close above the tenkan would reduce the bearish bias, but one above the kijun is key for a larger recovery.

The pound is dealing with a run of record-high UK COVID cases nS8N2RV07Q and political uncertainty nL1N2T2040.

UK data remain robust and Bank of England Chief Economist Huw Pill said the central bank would need to raise interest rates further if inflation persists nL8N2T22CE, but markets have already priced that in.

This week's rebound, after another failed attempt to break key pandemic recovery Fibo props by Dec.
8's 1.31615 nadir, has allowed recently oversold daily RSIs to be reset above 50 and may have reduced hefty net spec IMM shorts.

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Source:
Refinitiv IFR Research/Market Commentary

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