What now for sterling after bears stumble?
Sterling rose slightly to 1.2674 in early NorAm after testing recent trend lows ahead of its June 27 low at 1.2616 in early European trade and is now likely to remain within its 1.2710-1.2613 range awaiting UK election and U.S. and British inflation data.
The early GBP/USD slide came on the back of rising Treasury yields, which have rallied on the perception that a second Donald Trump presidency is more likely following last week's debate and recent court rulings.
The Treasuries selloff along with Fed reluctance to signal imminent rate cuts, the dollar remains well bid against most major currencies, albeit to a lesser degree relative to sterling since the BoE has a more hawkish outlook than the ECB and BoJ.
However, recent U.S. and UK data indicate diminishing inflation, so their hawkish exceptionalism might not last.
The recent rise in G10 USD net spec longs NETUSDG10=, and falling GBP longs 1096742NNET, would indicate markets are betting the BoE blinks first.
If so, that could send GBP/USD below 1.2613, putting support at the 200-DMA by 1.2570 and May 9 low at 1.2446 in focus.
For more click on FXBUZ
GBP Chart: https://tmsnrt.rs/3VR3ruK
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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