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Jul 29 - 11:55 AM

GBP/USD - COMMENT-Sterling Rallies To 5-Week High After US GDP Misses Forecast

By Paul Spirgel  —  Jul 29 - 10:13 AM

GBP/USD rallied on Thursday after disappointing U.S. GDP data, reaching highs by 1.3980 after extending the session's earlier gains above the 50% Fibo of the June-July range -- at 1.3911 -- with sterling bulls regaining momentum for further advances.

Helping cable's outlook, the pound broke 100- and 55-day moving average resistance at 1.3925 and 1.3969, respectively.

GBP/USD initially whipsawed after the U.S. data as traders weighed the below-forecast headline GDP against rises in PCE prices advance nL1N2P434L, which came after Thursday's Fed meeting avoided specifics on asset purchases tapering, tempering dollar enthusiasmnL1N2P41Q9.

The pound isup nearly 3% from its July 20 low at 1.3573, as bulls look toward firming BoE rate expectations, in contrast to Fed uncertainty and a stagnating ECB outlook.

The divergence of U.S.-UK rate normalization timing is becoming more stark as UK short-sterling futures price a 25bpp rate hike between March and June 2022, with U.S. Eurodollar futures hinting at a Q4 2022 Fed hike.

Bulls are pinning their hopes on a hawkish BoE lean at the Aug. 5 MPC meeting to overcomethe early June 2021 high at 1.4250.

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Source:
Refinitiv IFR Research/Market Commentary

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