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Aug 04 - 11:55 AM

GBP/USD - COMMENT-UK In The Cross Hairs As Sterling Slumps Toward 10-DMA By 1.2933

By Paul Spirgel  —  Aug 04 - 10:05 AM

Sterling slumped below 1.3000, outpacing other major currencies on the way down as UK-specific issues returned to center stage ahead of this week's BoE meeting.

GBP/USD backed off Europe session highs by 1.3108 as traders wondered whether Thursday's BoE meeting would provide clues as to whether policy makers might cut rates below zero at a later date to jumpstart the UK economy.

Sterling bulls had shrugged off negative-rates speculation and the EU-UK trade negotiations impasse as they rallied the pound to Friday's trend high at 1.3170, a touch below its pre-coronavirus peak of 1.3200 struck on March 9.

Whether GBP/USD should be trading near pre-pandemic highs remains an open question.

Friday's 1.3170 high appears to be a top for now, and a break below 10-day moving average support at 1.2932 would facilitate tests of multiple DMAs down to the 100-DMA by 1.2443.

Without a vaccine or trade talk progress, GBP/USD bulls need non-UK help.
However, the two main determinants of recent dollar weakness -- China trade angst and rising U.S. COVID cases -- risk derailing UK growth if they persist.

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Source:
Refinitiv IFR Research/Market Commentary

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