BUZZ-COMMENT-Sterling's reprieve on M&A talk probably temporary

Cable is still battling the erosion of UK rate-hike expectations due to a run of poor data recently, but it received a reprieve today on the back of M&A talk . That helped sterling find support by 1.3919, just ahead of 50% Fib of 2018s range at 1.3918. But that may prove temporary. Intermittent demand issues notwithstanding, cable remains dominated by the BoE (Shenzhen: 000725.SZ - news) outlook. In that regard, markets will scrutinize Friday's UK GDP. A miss would indicate further declines in inflation, which may move BoE hawks such as McCafferty and Saunders to dial back rate-hike rhetoric. Today's UK PSNB miss and Germany's IFO disappointment hint at a continued sloth-like recovery in Europe, backing up recent dovish-leaning comments by both Carney and Draghi . With Brexit fears and UK political uncertainty reduced, the BoE's rate policy is likely to be the prime determinant of GBP/USD in the near-term. Reduced inflation and falling growth are likely to weigh further on GBP/USD, and a close below the 50% Fib and daily cloud base by 1.3902 opens the way for a drop to 2018 lows by Jan 10s low by 1.3458.