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Feb 20 - 12:12 PM

GBP/USD - COMMENT-UK Retail Therapy Fails Brexit-Beleaguered Sterling

By Paul Spirgel  —  Feb 20 - 10:30 AM

British retail sales surpassed forecasts, adding to a string of expectations-beating data, but the sterling outlook is once again succumbing to EU-UK trade uncertainties.
GBP/USD remains offered, trading at 1.2875 slightly above new 2020 lows at 1.2849.
Traders are focused on a potential impasse over EU supervision of so-called level playing field issues, after UK's David Frost said giving up control on this would contradict the point of Brexit nL8N2AH4IE.
EU-UK trade and China virus uncertainties could trump incremental UK data beats and keep the BoE on dovish hold.
BOEWATCH on Eikon shows a near 80% chance for a UK rate cut by December 2020 and a fairly flat short-sterling curve over the next few years.
While the U.S. Eurodollar curve shows nearly two Fed cuts by March 2021, which may benefit GBP/USD, no-deal Brexit fears and the large U.S. rate advantage should mute sterling gains.
Bulls need to regain the 55-DMA at 1.3062, but remain at a disadvantage below the Jan. 31 high at 1.3210.
Bears remain in control, eyeing support at 1.2822, the Nov. 22 low, and 1.2769, the Nov.
8 low.
More firm support comes at 1.2694, the 200-DMA.


GBP Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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