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Apr 29 - 11:55 AM

GBP/USD - COMMENT-Sterling Enjoys Squaring-Up Rally As Fed Prepares For Spotlight

By Paul Spirgel  —  Apr 29 - 10:20 AM

GBP/USD rallied on Friday as markets engaged in precautionary position pruning before Fed and BoE meetings next week that could send cable toward 2020 lows of 1.2252 and 1.2075.

Cable maintained gains of 0.69% at 1.2548, off early U.S. highs at 1.2585 and up from Thursday's 21-month low at 1.2412, trimming gains only slightly after PCE data suggested the U.S. Q1 GDP contraction had painted a misleading picture.

The PCE data quashed some market concerns that the Fed may temper its recent hawkish tone to foster growth, like the BoE.

U.S.
and UK rate futures still highlight expected dollar dominance over sterling, with the Fed projected to hike rates a further 252bps by December and the BoE seen hiking just 151bps.

Barring an increasingly unlikely change of direction by either central bank, GBP/USD could be headed downward for tests beyond Thursday's 1.2412 low, en route to June 2020 lows by 1.2252 and late-May 2020 lows by 1.2075.

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Source:
Refinitiv IFR Research/Market Commentary

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