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Jul 16 - 11:55 AM

GBP/USD - COMMENT-Sterling Bears Hold Sway After Surprise US Retail Sales Rise

By Paul Spirgel  —  Jul 16 - 10:12 AM

GBP/USD slid on Friday after above-forecast U.S. retail sales nL1N2OS0ZV rekindled traders' expectations of earlier Fed asset purchases taper and rate rises, despite downward revisions, while rates trajectories and Delta concerns continue to slow sterling.

Sterling was last down 0.27% at 1.3805, though off its post-retail sales low at 1.3792 nL1N2OS0ZV.

Recent cable weakness is somewhat confounding given the UK is keeping pace with the U.S. on economic data beats following a rapid COVID vaccine rollout, though fears that lifting lockdowns next week may exacerbate the Delta-variant spread have lingered.

Sterling weakness also runs counter to the uptick in hawkish BoE comments, which will make for an interesting MPC meeting on Aug 5, as BoE members Saunders and Ramsden join the growing cadre of hawks nL1N2OS0M7.

Short-sterling futures hint at an earlier UK rate hike, relative to the U.S., with the BoE projected to increase between March and June 2022, while Eurodollars hint at U.S. rates rising between September and December 2022.

GBP/USD's recent weakness may be a function of rate moves after initial central bank hikes, with Eurodollar futures showing 3-month rates at 1.07% by December 2023, while short-sterling futures show 0.71% over the same time-frame.

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Refinitiv IFR Research/Market Commentary


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