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Oct 17 - 11:55 AM

GBP/USD - COMMENT-It's Still The Economy, Stupid, For Sterling

By Paul Spirgel  —  Oct 17 - 11:05 AM

The combination of firm U.S. growth, which is likely to keep U.S. rates high, and weakening UK economy hinting that the end may be near for the BoE's hiking cycle is likely to weigh on sterling, leaving support at Friday's 1.2123 low and the Oct.
4 trough at 1.2039 in focus.

GBP/USD fell to 1.2134 after hot U.S.
retail sales
bolstered the high-for-longer Fed narrative, though sterling got a reprieve following soft U.S. homebuilder sentiment, which coincided with yet another sign of a firm bid in the lower 1.21 region.

The post-retail sales slide highlighted sterling's economic vulnerability after overnight losses on below-forecast UK earnings.

The 1.2134 and 1.2039 support could be tested after UK inflation data on Wednesday.
Reuters consensus forecast is for UK September CPI growth to drop to 6.6% from 6.7% and core at 6% from 6.2%.

With UK inflation diminishing, traders will be focused on when, and how fast, the BoE will begin cutting rates and will continue unwinding early 2023 GBP longs 1096742NNET put on when hikes were still the order of the day.

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Refinitiv IFR Research/Market Commentary


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