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Jan 13 - 11:55 AM

GBP/USD - COMMENT-Shallow Dip From Highs Hints Sterling Resistance May Be Transitory

By Paul Spirgel  —  Jan 13 - 10:00 AM

GBP/USD fell Friday, unable to hold gains above 1.22 for the third time in five sessions as 2-year U.S. Treasury yields backed up off Thursday's 3-month lows, though sterling's shallow retracement indicated that bulls would eventually achieve their breakthrough.

With the Fed nearing the end of the current hike cycle, most likely by June 0#FF:, and a possible pivot to rate cuts beginning in Q4, traders have been unwinding dollar longs, boosting GBP/USD from its 2023 low at 1.1842 on Jan. 6 to current levels.

Sterling is likely to continue to probe higher as the steady-to-lower Fed rate expectations shift the short-term yield advantage in favor of the UK.

Traders' reluctance to push GBP/USD higher stems from lingeringpolicy uncertainty as Fed members push back against market bets that U.S. rates will peak below 5% and cuts will materialize in the second half of the year.

Meanwhile, with some BoE members wary of inflation's effects on UK growth there is risk that the British central bank may take its foot off the brake, which would stall sterling gains.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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