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Nov 18 - 11:55 AM

GBP/USD - COMMENT-Sterling Falters Above 1.35, Eye 200-HMA Support By 1.3463

By Paul Spirgel  —  Nov 18 - 09:59 AM

GBP/USD's slow drift higher lost steam at its early European high by 1.3514 on Thursday, falling back to 1.3468 on cross-related selling as traders reduced sterling and dollar long positions versus the euro and yen, though BoE expectations remained the market's primary focus.

The pound found support by its 200-HMA at 1.3463 in U.S. trade, NorAm.

Recent GBP, and USD gains were fueled by heightened expectations for BoE and Fed rate hikes, particularly versus EUR in light of the more slowly normalizing ECB.
Trend lows in the EUR and JPY have since stirred shorts to take profits.

The road ahead for GBP/USD remains contingent on UK normalization, especially after sterling volatility increased when the BoE shocked markets by deciding not to hike rates in November.

Eikon BOEWATCH indicates odds for a 25bp BoE hike on Dec.
16 have fallen to 52% from 66% last week.
Another BoE rate disappointment in December, amid rising U.S. inflation pulling forward expectations for an increased pace of U.S. taper and early Fed hikes, would put GBP/USD's 2021 low at 1.3354, hit on Nov 12, in sharper focus, opening the way for a further retracement to November 2020 lows by 1.2854.

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Refinitiv IFR Research/Market Commentary


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