Sterling shrugs off election uncertainty, bulls eye cloud base at 1.3050
GBP/USD broke above resistance just ahead of 1.30 rising above its 21-DMA to session high 1.3020 in early NorAm trading, and bulls now target the daily cloud base by 1.3050 as traders lighten recent Trump trades as U.S. Election Day progresses in what is expected to be a close race.
Markets see policies of former President Donald Trump as potentially more dollar positive due to his trade stance favoring tariffs, which could potentially become inflationary. A victory by Vice President Kamala Harris is seen as potentially less favorable scenario for the dollar due to her softer trade stance, which -- inflation allowing -- could lead to lower Fed rates and possibly pull GBP/USD higher.
Current STIR futures, as seen on LSEG's IRPR, indicate both the Fed and BoE are expected to cut rates by 25bp this week.
However, further out the futures strip, the BoE policy path shows a shift to a higher BoE rate path in the near term. This should keep GBP/USD relatively bid versus the dollar regardless of post-election volatility.
For now 1.3050 the daily cloud base, and 1.2845, the Oct. 31 post-budget low, remain first-line resistance and support levels.
For more click on FXBUZ
GBP Chart: https://tmsnrt.rs/4hwVuoL
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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