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Aug 18 - 01:55 PM

GBP/USD - COMMENT-Sterling Finds Support By 1.3730 As Risk Unwind Pauses

By Paul Spirgel  —  Aug 18 - 10:00 AM

Sterling rallied on Wednesday off its overnight low of 1.3731 to trade up 0.1% at 1.3764, finding support by the last two days' lows near 1.3730, the 61.8% Fib of July's, 1.3573-1.3984, range.

Despite the pound's tepid recovery off 3-week lows, events outside of the UK -- COVID case rises and Afghan political turmoil -- are increasingly affecting sterling.

Sterling rose in 2021 on rapid UK vaccinations and diminished post-Brexit trade fears.

With the global number of COVID Delta variant cases rising, and growth and inflation gains seen reverting to more pedestrian levels, sterling bulls have lost some vigor.

Though UK short-sterling futures 0#FSS: hint the BoE will hike rates in 2022 ahead of the Fed, the BoE's hike path will be flatter, with short-sterling indicating UK 3-month rates will be at 0.65% in Dec 2023, while 3-month Eurodollar futures 0#ED: indicate U.S. rates will be at 1%.

Another close below the 200-DMA at 1.3786 adds to recent bearish GBP tones and will likely test support at the 61.8% Fib by 1.3730, opening the way for a move to mid-July lows by 1.3573.

A hawkish tilt FOMC minutes release or Jackson Hole Symposium on Aug.
26-28
would jumpstart the Fed rate hike watch and should presage more GBP/USD losses.

For more click on FXBUZ


GBP Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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