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May 13 - 01:55 PM

GBP/USD - COMMENT-Sterling Bulls Woes Continue As New 2-Year Low At 1.2156 Probed

By Paul Spirgel  —  May 13 - 10:35 AM

GBP/USD extended recent losses on Friday, falling to a two-year low of 1.2156, with intermittent rebounds serving to prepare bears for further moves lower, leaving the spotlight on the May 18, 2020 low at 1.2075 next.

Current macro and geopolitical conditions present few obstacles for cable shorts, with the BoE intent on a campaign of only gentle rate hikes in the face of 7% inflation -- far out-stripping its 2% target -- as it braces for economic downturn.

In contrast, the more aggressive Fed FEDWATCH is showing no signs of backing down from its inflation fight, adding to bearish GBP/USD momentum, while China's COVID-related lockdowns and the Ukraine conflict sap global growth and further undermine risk-sensitive sterling.

Inability to resolve post-Brexit tensions over the Northern Ireland protocol issue are an additional irritant to sterling sentiment.

GBP/USD bears will probably remain in control until the news flow changes or a policy shift from the Fed or BoE occurs.

Cable was last trading flat at 1.2204.
A close below the May 18, 2020 low at 1.2075 would put 1.1778, the March 26, 2020 low, in bears' sights.

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Refinitiv IFR Research/Market Commentary


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