GBP/USD hovered near flat in early NorAm trading, offered by 55-DMA resistance at the session high 1.2765, amid light summer liquidity and Click here uncertainty.

Though GBP/USD kept near trend lows, the pound has held up reasonably well when measured against its peers.
GBP/USD has gained 2.4% over the past 3-months, while the EUR slid 11% and the yen has weakened by 34%, as UK rates 0#SON3: remain above U.S. rates 0#SRA: and expected to remain higher-for-longer.

Sterling remains supported by the BoE's ongoing fight against inflation, which remains above the 2% target high even though it has reduced considerably, falling to 6.8% in July 2023, well-below late 2022 highs by 11%, with price growth supported by higher wages and employment.

While high inflation and rates have benefited GBP bulls recently, lifting GBP net spec long positioning to 16-year highs 1096742NNET, the higher UK rate expectations come with risks.

Should global growth remain challenged, as China struggles, high UK rates are likely to tip the UK into a deep recession, which could spur GBP longs to exit and ultimately push GBP/USD back toward March 2023 lows sub-1.20.

For more click on FXBUZ