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🚧💷 Sterling Correction Overshoots Yield Differential: Cable FX Macro

  • GBP/USD rose for three consecutive weeks before paring losses, the pair rallied about 600 pips from its October lows to reach levels above 1.2700

  • An unwind of bullish dollar bets and a firmer risk sentiment sent the pound to the highest level since late August. November saw the pound post its best month this year

  • The correction seems to be overshooting its fundamentals, as yield differentials have not retraced in favour of GBP as much. In fact, U.K. 10-year Gilt yields dropped earlier this week to post the worst session since August 23, down 17bps on the day

  • A combination of extended risk and a potential disappointment in Fed pricing could send sterling lower. However, seasonal support the pound during December



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