Sterling post payrolls surge stalls as traders await more rate fodder
GBP/USD charged higher after Friday's softer than expected U.S. payrolls data briefly increased betting on deeper and faster Fed cuts, though the rise reversed as the market tempered that view, leaving cable bulls to seek a new catalyst for further gains.
Though the disappointing payrolls and downward revision to July data indicated that restrictive Fed policy could be stalling the economy, markets calculated that an initial cut of 50bp by the Fed might be a bridge too far.
Though the BoE has been cautious about further easing, it has not been reliably more hawkish than the Fed this year, so sterling bulls may be wary of putting their trust in the UK central bank as a driver for further gains.
Futures markets are currently pricing in a stark divergence in UK-U.S. rate spreads, but there is growing risk that the BoE could fall in line with the more dovish stance of other major central banks.
If so, that would expose downside targets such as the Sept. 3 low at 1.3088 and rising 21-DMA at 1.3053.
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GBP Chart: https://tmsnrt.rs/3AUgMM7
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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