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Sep 08 - 01:55 PM

GBP/USD - COMMENT-GBP/USD Getting Hit From All Sides, Summer Lows Possible

By Randolph Donney  —  Sep 08 - 11:50 AM

Sterling has hit the skids this week and could slide to its summer lows unless the dollar suddenly loses its bid.
UK tax hikes nL1N2Q90B2, now going through Parliament, are seen as a potential drag on future growth.
In fact, that drag could be enough to limit BOE tightening prospects, thus weighing on the pound.

GBP/USD has already fallen below the 50% Fibo of the August-September 1.3602-1.38905 rebound at 1.3746, as well as last week's lows.
This with the dollar up broadly again today, and risk-off flows weighing on the risk-sensitive pound.

In any event, specs, who got net short sterling over the last two CFTC reporting periods, still have an edge while prices are below the Aug.
13 weekly high and weekly kijun at 1.3905/911.
August's 1.3602 low by July's 1.35725 nadir held near the 23.6% Fibo of the entire pandemic recovery, and the 55-week moving average last at 1.36206.

Sterling was also dented by clear indications that Brexit has hurt UK exporters, with exports to Germany tumbling 11% in H1 and the UK no longer a top-10 trading partner with Germany nL1N2QA15Y.

There's also no indication the EU will allow the disruptive Northern Ireland protocol to be renegotiated nL8N2QA32G.

BOE Governor Bailey sounded reasonably upbeat about COVID-related risks, including inflation, sorting itself out over time nS8N2MS086, giving sterling a slight boost off today's lows.

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Source:
Refinitiv IFR Research/Market Commentary

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