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Aug 28 - 11:55 AM

COMMENT - Fed Fallout, EUR/USD Gains Help Sterling Take 1.33

By Paul Spirgel  —  Aug 28 - 11:15 AM

GBP/USD climbed to a new 2020 high of 1.3341 nL1N2FU0OD as the Fed's long-term dovish shift nL1N2FT1K8 added to the dollar's misery, enhancing the pound's prospects of extending its summer rally into the autumn.

The U.S. Treasury yield curve steepened nL1N2FT1K8, with the front end reacting to the lower-for-longer while long-end yields rose. With U.S. short-term rates anchored near zero, futures 0#ED:, 0#FF: showed no expected rate changes over the next 2-1/2 years, adding to dollar bulls' blues.

Dollar bears focused on economic uncertainties related to the congressional stalemate over COVID-19 recovery aid, the U.S. election and coronavirus outbreaks.

Bulls remain in control with 10- and 21-day moving averages at 1.3168 and 1.3121, which have trailed GBP/USD since early July, providing support.

GBP/USD's break above last week's bottleneck in the high 1.32s bodes well for further gains, with near-term targets at 1.3356, the upper 30-d Bolli, Dec.
16's high 1.3422
and ultimately Dec.
13's post-UK election flash high 1.3516

GBP/USD bullish sentiment may be enhanced by, of all things, Brexit.
Should a EU-UK trade deal be struck nL8N2FU2UJ, flat GBP/USD positioning 1096742NNET is likely to grow, pulling GBP/USD above its December highs.

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Refinitiv IFR Research/Market Commentary


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