Sterling traded little changed against the dollar on Thursday after the dust settled in the wake of unexpectedly strong U.S. retail sales and other data -- coupled with a confounding fall in Treasury yields -- leaving the pound underpinned for the moment.
Initially cable rallied toward session highs at 1.3806 before reversing toward 1.3782, just above Thursday's 1.3762 low.
Though the data would support dollar gains, the Fed's well-advertised intention to keep rates near zero while looking past transitory inflation and growth spikes will weigh on the U.S. currencynS0N2JQ02B.
December 2023 Eurodollar futures EDz3 have risen 12 bps off Tuesday's low, pricing in lower rates after strong CPI and retail sales, showing market acceptance of the Fed's rate view.
For now, sterling bulls are benefiting from the Fed low-rate largesse, having rallied cable away from multiple lows below 1.37.
However, UK short-sterling futures are pricing in lower UK rates, damping sterling gains.
GBP/USD must regain the daily cloud by 1.3846 or risk protracted losses on a break below April 12's 1.3670 low.
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