To QT or Not to QT, That is the Question

  • GBP/USD may see further short-term relief from USD
  • If Fed defers or goes slow with balance sheet unwind  
  • Fed & BoE decisions eyed as U.S. data deluge looms

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The Pound to Dollar rate was relieved last Friday from recent heavy selling pressure but may need the Federal Reserve (Fed) to defer the anticipated start of its balance sheet reduction process known as quantitative tightening, or QT, in order to avert further losses and more sustainably recover its poise. 

Sterling traded as low as 1.2411 at its nadir last week when a rallying Dollar toppled most major currencies including the Pound, Euro and Japanese Yen.

“The USD’s core drivers seem easy enough to identify – a hyper-hawkish Fed and more recently, a souring of the global risk mood,” writes Richard Franulovich, head of FX strategy at Westpac, in a Monday research briefing.

“The Eurozone is battling a more acute stagflationary situation, while China is battling a…

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