Comment: Sterling bounces off 1.37 amid weak German Ifo, US taper flutter

Noram Lithium

25/08/2021 15:16

Aug 25 (Reuters) - Sterling was flat on Wednesday after dipping near 1.37 in
early U.S. trade amid below average Refinitiv Matching liquidity  FXHEAT 
 urn:newsml:reuters.com:*:nL1N2PW0ZZ as markets digested a weak German Ifo data and increased COVID
cases, which have tempered global growth and inflation expectations.
    GBP/USD has been held hostage to fluctuating Fed taper expectations, which
could offset the BoE's own stimulus reduction outlook as a sterling driver, with
some still bracing for Fed Chair Jerome Powell to offer details of the U.S.
central bank's plans to remove accommodation at Friday's Jackson Hole symposium.
    Markets generally expect the Fed to begin tapering asset purchases by
December 2021 and ending asset purchases in H2 2022, which would bolster the USD
versus other currencies.
    The main risk to Fed taper is the recent rise in COVID's Delta-variant cases
 urn:newsml:reuters.com:*:nS0N2LF02H, which may temper the U.S employment recovery, slowing U.S. growth
and inflation. This risk is seen as global, and USD weakness will likely be
transitory.
    For now, GBP/USD is likely to remain rangebound between its 30-day Bollis 
spanning 1.3616 and 1.3989, with risks skewed to the downside should Powell get
the ball rolling on taper.
    For more click on  FXBUZ 

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GBP Chart:     https://tmsnrt.rs/3B9vLN4
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 (Paul Spirgel is a Reuters market analyst. The views expressed are his own)
 ((Paul.Spirgel@thomsonreuters.com))