November jobs data and December CPI data could provide a modest boost to the pound, potentially extending the short squeeze that has been building since late November. While GBP/USD may lead the move due to dollar weakness, EUR/GBP remains vulnerable, with major risk-off events likely to cap the pound’s upside, notes ING FX analyst Chris Turner.
GBP/USD is expected to outperform dollar weakness
“We think this week’s set of UK data – November jobs data and December CPI – could be a bit bullish for the pound and an extension of the short squeeze that has been running since late November. We feel the weak link here will be EUR/GBP, with risks at 0.8600. However, dollar weakness at the start of the week could mean GBP/USD sees the majority of this movement. Above 1.3415/3420 could open the door to further Height. Area 1.3450/3460.
“We recognize that sterling tends to underperform in periods of major risk aversion; there are clearly many moving parts at play here.”
