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GBP/USD – 10Y US-UK yield spread rises in a GBP-negative manner

GBP/USD – 10Y US-UK yield spread rises in a GBP-negative manner

  • 10-year US-UK yield spread is at the highest level since Sep 9
  • GBP/USD holds above 50-DMA despite widening US-UK 10Y yield differential

GBP/USD remained bid above 1.32 handle in Asia, but the bullish move struggled to gather pace.

A sharp move from 1.3088 to 1.3185 on Friday left a higher low on the daily chart, still the follow through has not been encouraging as the benchmark bond yield differential continues to widen in favor of the US dollar.

Focus on US PMI

The preliminary Markit manufacturing PMI is expected to show a slight improvement (53.6 from 53.1) in the activity in October. A better-than-expected number could push Treasury yields higher and strengthen demand for the US dollars.

Meanwhile, GBP bulls are likely to wait on the sidelines ahead of tomorrow’s Q3 GDP release. A weak print may dent the probability of a BoE rate hike next month.

GBP/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet, writes, “Intraday technical readings offer a neutral stance, as in the 4 hours chart, the price is not only trapped between Fibonacci retracements, but also between horizontal moving averages, with the 200 EMA having rejected an early advance, currently at 1.3222, and a flat 20 SMA converging with the 50% retracement of the latest bullish run at 1.3180. Indicators in the mentioned chart hover around their mid-lines, with the RSI presenting a modest upward momentum, which alone is not enough to confirm further gains ahead.”

 

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