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Apr 03 - 11:55 AM

GBP/USD - COMMENT-Withstanding ADP Beat May Be A Good Sign For Sterling

By Paul Spirgel  —  Apr 03 - 09:35 AM

Sterling's ability to hold up relatively well in the face of above-forecast ADP on Wednesday may indicate that selling pressure in GBP/USD from the recent Fed repricing has largely run its course, allowing cable to stabilize -- or at least slow its descent.

Though cable slipped to a NorAm session low after the data, it held in a slight 1.2583-1.2572 range, with ADP failing to show enough strength to diminish further the Fed rate cut view.

LSEG'S IRPR page still indicated about a 60% chance a Fed cut in June, unchanged from recent levels, with easing by year-end hovering at -66bp, a touch below policymakers' median guidance of -75bp.

The subdued reaction to the upbeat ADP data hints the market has come to terms with the high-for-longer Fed narrative, which is being affirmed by a string of above forecast U.S. data and faces a further test in Friday's non-farm payrolls report.

For now, assuming data comes in as forecast, further dollar gains may be more elusive as the repricing of less dovish Fed expectations appears complete, with the risk of only incremental advances in the U.S. currency from current levels.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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