ADP beat could give sterling longs pause for thought
Sterling remains the best performing G7 currency against the dollar in 2024, up 4.3% year-to-date, and should remain well bid on favorable interest rate differentials, but longs might still trim positions if Wednesday's ADP proves to be representative of other key U.S. employment data.
On Wednesday, cable held slightly above the previous session's post-Iran missile attack low at 1.3237 as the market considered Middle East tensions and shifting Fed policy expectations.
The robust ADP, coming after Fed Chair Jerome Powell pushed back against aggressive U.S. rate cuts on Monday, may leave GBP/USD reluctant to push the pound to new 2024 highs above 1.3434.
Sterling net spec positioning had been rising since the Fed's 50bp cut on Sept. 18 increased betting for more easing in large increments, but policy uncertainty and geopolitical angst could lead to a slide toward September lows by 1.30.
Still, front-end U.S. and UK rate strips indicate a protracted slide in GBP/USD is unlikely. However, a close below 1.3048 the 50% Fib of 1.2666-1.3434 may shift momentum to bears, putting the August low at 1.2666 in sharper focus.
For more click on FXBUZ
Sterling Chart: https://tmsnrt.rs/4dvqxxK
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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