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Jun 07 - 11:55 AM

GBP/USD - COMMENT-Sterling Hugs 10-DMA As C.bank Guidance Awaited

By Paul Spirgel  —  Jun 07 - 10:26 AM

Sterling held slightly firmer on Monday within its recent 1.41-1.42 range, remaining tethered to its to its 10-DMA near 1.4162 as the market awaits impetus from key central bank meetings this month.

Probes above 1.42 and dips below 1.41 have led nowhere with Fed and ECB pledges to remain accommodative through rising but supposedly transitory inflation and early-stage pandemic recoveries.

This week's ECB meeting, and Fed and BoE gatherings later this month will set expectations for taper and, eventually, rate moves, which may have significant consequences for GBP bulls, as the pound clings to 5% gains versus the EUR and 6% gains versus the USD over the past six-months.

The Bank of Canada meeting on Wednesday might also draw attention given its first mover status on tapering.

Some traders may begin preparing for a hawkish shift in U.S. and euro zone policy.
UK inflation currently lags both at 1.5%, versus the BoE's 2% target.
Should U.S. and euro zone growth and inflation outlooks rise faster than the UK, recent GBP gains are likely to unwind limiting further GBP strength in H2 2021.

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Source:
Refinitiv IFR Research/Market Commentary

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