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Jul 27 - 11:55 AM

GBP/USD - COMMENT-Fed Rate Uncertainties Keep Sterling On The Brink Of New Trend Highs

By Paul Spirgel  —  Jul 27 - 09:50 AM

Sterling bulls have once again shied away from highs near the 30-DMA at 1.2074 and Fibo resistance by 1.2083.
Bulls remain reluctant to probe new highs ahead of today's Fed rate announcement and presser, which will have significant consequences for the dollar broadly and GBP/USD specifically.

Today's Fed rate announcement is expected to yield a 75bp hike.
Should the Fed surprise with a more aggressive 100bp increase, GBP/USD is likely to move lower taking out 10-DMA support by 1.1975 en route to July 18 lows by 1.1864.

However, if the Fed keeps to its expected hike path of 75bps today and 50bps in September, the presser will be parsed for hints regarding a potential shift from uber-aggressive inflation-fighting to a more symmetrical inflation-growth centric policy.

A shift by the Fed away from its current inflation-centric tack is likely to lift GBP/USD above its recent high watermark at 1.2090.
With the BoE expected to raise rates by 50bps on Aug 4, versus recent 25bp hikes, converging BoE-U.S.
rate paths favor further GBP/USD retracement toward the mid-June high at 1.2405.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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