Sterling overrun by Trump trades and less-dovish Fed policy view
Sterling's struggles continued on Friday as the one-two punch of post-election dollar accumulation and less-dovish Fed policy expectations after Chair Jerome Powell said there was no need to rush rate cuts, which should keep GBP/USD on the downswing.
Sterling tested new trend lows, falling to a 4-1/2- month low at 1.2619 as the torrent of USD buying is overwhelming the dwindling UK rate advantage out to December 2025.
While sterling remains, relatively speaking, the best performing G7 currency versus the dollar year-to-date, GBP/USD recently dipped to negative territory as traders stockpile dollars assuming President-elect Donald Trump's policies will fuel U.S. inflation.
Friday's IMM release of spec positioning may be instructive for sterling traders.
With sterling down from election-day highs above 1.30 to current trend lows just above 1.26, traders will parse the net data, which has indicated receding spec longs, while the details may provide clues to the near-term path as well.
Sterling longs slid from 161k in early September to 120k last week, which is no surprise given the slide from 2024 highs above 1.34. On the short side, specs have increased shorts from 53k contracts in early September to 76k last week.
Should this trend continue, the Aug. 27 low at 1.2613 is likely a speed bump on the way to early May lows by 1.2446 and even the April 22 low just below 1.23.
For more click on FXBUZ
GBP Chart: https://tmsnrt.rs/3YTBRyq
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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