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May 10 - 11:55 AM

GBP/USD - COMMENT-Sterling Needs Help To Prolong Post-BoE Rebound

By Paul Spirgel  —  May 10 - 10:45 AM

GBP/USD ran into resistance near the 200-DMA on Friday, capping its rally from the previous session's rise from post-BoE lows, and fundamentals indicate that rebound -- sparked by soft U.S. jobless claims -- may be short-lived.

Rate expectations on LSEG's IRPR pages indicate an earlier and deeper UK policy easing path than in the U.S., with an inaugural cut priced at 50% for June and fully discounted by August.

In contrast, the market assigns an 80% chance of a Fed cut for September.

Looking at the full year, the BoE is seen cutting 57bp, while the market is projecting the Fed to ease by 44bp.

While the odds for a September Fed cut have risen, boosting the pound, increasingly dovish tones emanating from the BoE are likely to cap GBP gains.

That leaves the May 15 U.S. CPI report the next best hope for sterling bulls.
If U.S. inflation surprises to the downside, cable bulls would target the May 6 and 3 flash highs by 1.2593 and 1.2634.

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Refinitiv IFR Research/Market Commentary


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