Fed-BoE contrast leaves sterling vulnerable to new lows
GBP/USD found support in early NorAm at 1.2131 but remained lower on the day vulnerable as bears ride the lower 30-day Bolli lower, eying light support at the March 17 low of 1.2103 and more significant support at the March 12 low at 1.2012.
Cable's woes come as the dollar extends its surge on high-for-longer Fed expectations, whittling sterling gain for the year down to just 0.4% as the BoE's increasingly dovish rate path also draws market scrutiny.
The Fed's hawkish hold last week, noting inflation remains a concern, contrasted with the BoE surprise decision to halt its rate hike cycle on a 5-4 vote as UK growth concerns lead to a more cautious policy to assess the effects of past tightening.
The BoE rate outlook, even with UK inflation still near 7%, has sapped sterling bulls of their early 2023 vigor.
Without a significant drop in UK inflation, the dovish tone may move GBP/USD lower still, putting March 2023 lows by 1.1805 in focus, as traders doubt the BoE's ability to keep inflation expectations anchored.
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GBP Chart: https://tmsnrt.rs/3LItAHZ
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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