December 6, 2022

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Cable eyes the highs for the year as dollar slump extends

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GBP/USD climbs to a high of 1.4219, targets the February high at 1.4241

GBP/USD D1 18-05
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The dollar continues to wilt across the board as the technical plays extend across multiple pairs at the moment. Of note, EUR/USD is looking to hold a break above 1.2200 and GBP/USD as seen above, is starting to look towards the highs for the year.

The 24 February high @ 1.4241 is the next key resistance point to watch but if buyers can hold a daily close above 1.4200, it would be an encouraging platform to build on.

As much as there is a lot of talk of inflation, Fed policymakers have continued to try and water things down and that is rather evident in the more tepid action in the bond market.

10-year Treasury yields have struggled to get away from the 1.60% to 1.70% region and is holding thereabouts still despite all the data in recent weeks.

That said, just be aware that 10-year breakevens have continued to march higher – now at 2.56% – so there is still some sense of higher inflation expectations brewing.

How much of that, and how quickly, is going to transfer to broader markets will largely depend on the Fed’s resolve in the months ahead.

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