Sterling faces potential pain threshold as data risk looms
GBP/USD faces a potential slog in the near-term within last week's 1.3133-1.3011 range, but its recent losses have cast a spotlight on support around 1.30, which could open the way for further downside targets.
Comments from Minneapolis Fed President Neel Kashkari highlighted the recent shift in policymakers' rhetoric in favor of "further modest" reductions in rates, instead of bolder cuts such as the 50bp move that kicked off the U.S. central bank's easing cycle.
This outlook has weighed on cable, though with the U.S. government bond market closed for holiday and no significant data to be released Monday, it is likely GBP/USD will not break ranges.
Consecutive lower GBP highs underscore 1.30 as a potential pain threshold.
Governor Andrew Bailey recently said the BoE could become "more aggressive" on rate cuts if there was further welcome news on inflation, adding downside risk to sterling.
UK data on Tuesday and Wednesday could be potential catalysts with Reuters consensus forecasts highlighting downside risks for earnings and inflation.
A close below 1.30 would probably be followed by a exodus of GBP net spec longs 1096742NNET, which are near 6-week highs, and put the Aug. 15 low at 1.2798 in focus.
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GBP Chart: https://tmsnrt.rs/3Y8b94Q
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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