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GBP/USD holds near a six-month high after US debt buyback plans

GBP/USD is near 1.3650 and near its highest level since February, after US Treasury actions that pulled the US dollar lower and boosted sterling.

Reported · Written up by our desk · Major Pairs

GBP/USD was trading close to 1.3650 late Tuesday, August 25, up about 0.1% on the day, after reaching its highest level since February. The pair’s range was relatively tight, roughly 33 pips between a floor just above 1.3600 and a ceiling slightly over 1.3650, according to FXStreet.

FXStreet said the latest sterling strength was driven largely by moves in US debt markets rather than a stand-alone pound catalyst. The advance from the 1.3500 area began after the US Treasury announced it would at least double purchases of longer-dated government debt, news that led the dollar to fall broadly and lifted major currencies including the pound.

FXStreet also flagged why the move may not be fully durable, pointing to a buyback facility aimed at capping long-dated Treasury yields. The outlet said that mechanism can remove part of the yield support the dollar had been drawing on, and that markets have raised objections that reshaping the maturity profile does not change the overall quantity of debt.

Positioning is another factor, FXStreet said, citing that large speculators remain net short more than 54,000 pound contracts. The outlet added that CPI inflation data, which returned to 2.9% year over year in July from 2.6% in June, suggests a potential pressure point for the Bank of England, with the next monetary decision scheduled for September 17.

Latest closeGBP/USD 1.354 ▲0.3%

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