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Aug 30 - 11:55 AM

GBP/USD - COMMENT-Sterling Holds Up Above 10-DMA At 1.3719 Amid Low Holiday Liquidity

By Paul Spirgel  —  Aug 30 - 10:17 AM

Sterling eased slightly on Monday but found support ahead of the 10-day moving average at 1.3719 after making a run to a new session low of 1.3737 from its U.S. open at 1.3751, though flows were light due to the UK bank holiday.

GBP/USD was clinging to a small 2021 gain, +0.57%, while the pound has gained more significantly versus low-yielders EUR, +4.3%, and the yen, +7.85%.

Relative interest rate expectations are key.
Short-term interest rates indicate euro-zone and Japanese interest rates will remain anchored at low levels.
Euribor futures indicate the first 10bp ECB rate hike will come in June 2023 0#FEI:, well after the UK 0#FSS: and U.S. 0#ED: are expected to hike in 2022.

The current stasis in GBP/USD will only be disrupted should rate expectations in the U.S. and UK diverge.
Friday's NFP release, should it move the dial on Fed Chair Jerome Powell's taper timeline, and the path of the COVID Delta variant will be key determinants of GBP/USD.

A dip below the 10-DMA at 1.3719 would open the way for a test of Friday's low by 1.3679.
An upbeat non-farm payrolls release bolstering U.S. taper expectations, would put July 20's 1.3573 trend low in sharper focus.

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Refinitiv IFR Research/Market Commentary


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