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GBP/USD Still Pressured Despite Pullback As USD Markets Look To Fed


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GBP/USD, BANK OF ENGLAND, US FEDERAL RESERVE, INFLATION -TALKING POINTS

  • GBP/USD hit lows not seen since the mid-1980s last week.
  • It has bounced since, but that’s a USD story rather than hope for GBP respite.
  • The market may have decided sterling has suffered enough for now.

GBP/USD Still Pressured Despite Pullback As USD Markets Look To Fed

 

The British pound has pulled back quite sharply from last week’s near four-decade low against the US dollar, but remains very short of positives and its long downtrend remains in place.

GBP/USD fell last week towards the $1.14 handle last seen in the distant days before the Plaza Accords of 1985, themselves aimed at reining in a similarly rampant US dollar.

This is a big week for economic data, but that’s only likely to underline the strength of the US’ economy’s position compared to that of the UK, and indeed most of Europe, where inflation remains a huge challenge and war in Ukraine paralyses crucial energy markets.

The pullback seen in many currencies against the dollar in the last few days is likely mere respite before important US inflation numbers due on Tuesday. August’s core inflation rate is expected to come in at 6.1%, above the 5.9% seen in July. Should it do so, the market will likely continue to price in aggressive interest rate rises from the Federal Reserve, to the detriment of the dollar’s rivals, including sterling.

Sep 12, 2022 | DailyFX
David Cottle, Analyst
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