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Oct 10 - 01:55 PM

GBP/USD - COMMENT-Sterling Probes Higher On Dovish Fed, More Hawkish BoE Outlook

By Paul Spirgel  —  Oct 10 - 11:35 AM

GBP/USD extended its ascent off the recent 6-month low at 1.2039, with bulls taking out 21-DMA resistance at 1.2265, emboldened by less-hawkish Fed expectations and recent less-dovish comments by the BoE's Catherine Mann.

The return of U.S. Treasury traders after Monday's holiday stirred a significant flight-to-quality slide in U.S. Treasury yields across the curve following violence in Israel and Gaza, which weighed on the dollar broadly.

Adding to sterling's rise is the decidedly more dovish tone coming from Fed officials suggesting that tightening of financial conditions could lead to more cautious approach to policy.

On the GBP side, BoE MPC member Catherine Mann said on Monday that the longer inflation remains above target the more aggressive central bankers need to be in reacting to it, which encouraged U.S.-UK bond spreads to widen in sterling's favor and prodded recently short GBP specs 1096742NNET to cover positions.

The recent flip to net short for GBP specs provides an opportunity for sterling bulls to reengage at more favorable levels.
Should resistance at 1.2392, the 50% Fib of 1.2746-1.2039, give way, bulls may make a run at multiple daily moving averages from 1.2441 to 1.2604.

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Refinitiv IFR Research/Market Commentary


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