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Jul 26 - 11:55 AM

GBP/USD - REFILE-BUZZ-COMMENT-Sterling Needs Help From The Fed, BoE To Make A Run At Mid-June Highs

By Paul Spirgel  —  Jul 26 - 09:45 AM

Fixes grammar in paragraph 4

Sterling has rallied off its early NorAm low 1.1965 currently trading -0.3% at 1.2015.
Summer liquidity and pre-Fed position-curating are having a dramatic effect on GBP/USD pricing.
For now, GBP/USD remains ensconced in its recent range bounded by its 10- and 30-DMAs spanning 1.1959 and 1.2078.

The elephant in the room for GBP/USD traders is Wednesday's Fed rate announcement.
Markets expect a +75bp move by the Fed FEDWATCH.

A 75bp hike, even though it is universally expected, will exacerbate U.S.-UK rate divergence and should cap recent GBP/USD gains.
However, should the Fed dial back its hawkish rate hike path GBP/USD is likely to move higher taking out resistance at 1.2083, the 50% Fib of 1.2405-1.1761 and today's high at 1.2090, potentially targeting mid-June highs by 1.2405.

The wild card for GBP/USD traders will be August 4's BoE meeting BOEWATCH.
The BoE is currently on a 25bp per-meeting hike path.
With UK inflation continuing to move higher futures markets are pricing an 87% chance of a 50bp BoE hike, which has helped strengthen the pound recently.
A disappointing 25bp hike is likely to push GBP/USD back below the 10-DMA at 1.1960, putting 2022 lows by 1.1761 back in focus.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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