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May 19 - 11:55 AM

GBP/USD - COMMENT-Sterling Slows Ahead Of Highs As Havens Sought Amid Bitcoin Crash

By Paul Spirgel  —  May 19 - 10:16 AM

Sterling cut its losses on Wednesday but struggled for momentum as investors preferred safe havens in the face of losses in stocks and other high-risk markets such as bitcoin.

The dollar and U.S. long-end Treasury's have received a risk-off boost, aided by bitcoin BTC= and ether ETH= falls, which suffered their largest one-day decline since March 2020, down 24% and 37% respectively, after China announced curbs on financial firms dealing in cryptos.

Sterling bulls encounteredincreasing difficulty maintaining recent strength, finding resistance above 1.4200, ahead of 2021's, Feb. 24 high, at 1.4240.

UK inflation data nL5N2N6132 showed mixed core CPI data amid unexpectedly high headline CPI and PPI and RPI.
UK growth has helped boost GBP/USD to current levels, near 2021 highs.

However, rising UK inflation and recent GBP strength, which makes UK exports less attractive, may hinder further growth, undoing the stimulative affects of recent accommodation.
The BoE may seek to temper the inflation outlook by harping, like the Fed, on the transitory nature of 2020 versus 2021 inflation data, which may delay GBP/USD gains in the near-term.
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Source:
Refinitiv IFR Research/Market Commentary

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