Sterling near its trend low awaiting data, c.bank guidance
GBP/USD remained near trend lows as traders await a catalyst, possibly Friday's PMI data, which could pull the pound out of its recent range, bounded by 1.26 on the downside and the falling 10-DMA at 1.2719 on the upside.
In the interim, traders will likely continue to follow U.S. Treasury and UK Gilt yields for directional signals as policy clues remain opaque heading into year-end and the inauguration of President-elect Donald Trump.
Early U.S. data, including weekly jobless claims and Philly Fed, did little to influence near-term Fed policy expectations.
Recent data has suggested persistent U.S. inflation, reducing expectations for a December Fed cut from near 80% in early November to 55% currently.
On the UK side of the equation, rising British prices have tempered sterling's decline as markets price a more symmetric Fed-BoE policy path in 2025. However, higher UK prices and their impact on Gilt yields may not benefit sterling longs going forward.
PSNB data indicated an increase in UK borrowing. With UK inflation above target, borrowing up and taxes rising, as per the recent budget, sterling longs are likely to use upticks in GBP/USD as a opportunity to lighten positions, which should finally take out support at 1.2598 and push GBP/USD toward its May 8 low at 1.2469.
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GBP Chart: https://tmsnrt.rs/3CAPWJZ
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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