FXStreet (Bali) - Paul Robson, Senior FX Strategist at RBS, notes that the current stance on the Sterling is neutral ahead of a possible downside break of technical trend line support.
"We are neutral GBP this week ahead of a possible downside break of technical trend line support in GBP/USD. A confirmed break will most likely need a USD kicker driven by a gradual shift to a more hawkish Fed."
"The narrative is whether inflation pressures are set to build more quickly than the Fed expects. Policy is more data-dependent than at any time since the start of the financial crisis."
"Whatever the Fed’s estimate is for spare capacity, a larger than expected rise in employment revealed in Friday’s US payrolls report would add to such concerns."
"Friday’s US core PCE data, the Fed’s preferred measure of inflation, will be important as it will inform on the jumping off point for the Fed’s inflation forecasts. On balance, we see this week’s events playing USD positive."