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Dec 09 - 11:55 AM

GBP/USD - COMMENT-Sterling Steadies Near 1.32 After Plan B, Focus Shifts To Fed, BoE

By Paul Spirgel  —  Dec 09 - 10:31 AM

GBP/USD clawed back to breakeven on Thursday, narrowly avoiding a second 2021 low in as many days as sterling remained under pressure from the UK's Plan B restrictions to stem the rising COVID tide.

The rebound left it hovering near 1.3200, up from early U.S. session lows by 1.3173.

Once an FX return leader among the majors in early 2021, sterling is limping toward year-end as doubts about rates normalization and worries about COVID cloud the outlook.

The BoE's wait-and-see approach to raising rates in early November unleashed a torrent of GBP selling versus the USD and other currencies, including low-yielders like the euro and yen.

Next week's BoE meeting may be a watershed event as another delay in hikes is likely to stir another round of GBP selling versus the USD, EUR and JPY.

Such a disappointment would put GBP/USD support by 1.3162, its Dec. 8 2021 low and the 200-WMA at 1.3135 which has trailed GBP/USD price since early November 2020 in sharper focus.

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Source:
Refinitiv IFR Research/Market Commentary

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