GBP/USD is holding on to overnight gains, trading +0.53% at 1.3145, though off European highs by 1.3173 nL1N29B06T.
Today's GBP gain comes as UK PMI data nL8N29B1RN beat forecasts moving short-sterling rates higher.
Sterling's rising rate view may aid GBP/USD bulls in the near-term, but a closer look at short-term U.S. and UK yield curves hints at only a slight advantage to the pound.
UK short-sterling futures are essentially flat, showing a rise of 13.5bps from March 2020's 0.76% to December 2024's 0.895%.
The U.S. Eurodollar curve moves from 1.72% in March 2020 to 1.77% in December 2024.
The path of these respective curves are slightly different, though both reach lows in March 2021.
The short-sterling curve begins to rise well before U.S. rates.
This earlier relative increase in UK rates might support GBP/USD gains in the near-term, particularly if Brexit negotiations provide for a easy transition.
With the heavy lifting done in GBP/USD's rise from October lows by 1.2200 and reversal of short IMM positioning to current long positioning, GBP/USD bulls may wish to express their view via relatively cheap options GBPVOL=FN as low global growth and rates will likely keep GBP/USD stuck between the 55-DMA at 1.2989 and the upper 30-day Bolli at 1.3329.
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