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Jun 14 - 09:55 PM

GBP/USD - COMMENT-Sterling To Remain Heavy, Unless The Fed Disappoints

By Andrew M Spencer  —  Jun 14 - 09:15 PM

Sterling fell 1.1% on Tuesday and should remain under pressure unless the Federal Reserve disappoints hawkish market expectations and undermines the U.S. dollar.

UK data on Tuesday suggested the tight jobs market is cooling nL8N2Y11L9, after soft GDP on Monday nL8N2Y00SH, taking the pressure off the Bank of England to act aggressively.

Ten-year gilt yields climbed 2 basis points on Tuesday, while Treasury yields jumped 9 bps, as widening spreads hit sterling. While the market is now pricing a 75 bps Fed rate hike later on Wednesday, BOEWATCH still shows a 25 bps hike priced for Thursday nL1N2Y11G3.

The UK decision to override some post-Brexit trade rules for Northern Ireland breaks the law according to the European Union and many UK lawmakers, opening the door to potential trade barriers with Britain's biggest trading partnernL8N2Y11D5.

The policy is driven by the UK government's priority on 'sovereignty', even though the N.
Ireland economy remains strong
In the 2022 Northern Ireland Assembly election, parties favouring continuance of the protocol won 53 of the 90 seats.

Also weighing on the pound, Scotland's leader said on Tuesday she is nearly ready to outline a plan for an independence vote, at a time when the Westminster government is unpopular nL8N2Y12T9.

GBP/USD charts are bearish after the 2022 slump; the 1.1934 New York low and 1.2210 early London high are initial support and resistance.

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Refinitiv IFR Research/Market Commentary


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