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Aug 28 - 11:55 AM

GBP/USD - COMMENT-Sterling Shrugs Off Hawkish Powell As The BoE's Rate Path Trumps Fed

By Paul Spirgel  —  Aug 28 - 10:00 AM

GBP/USD edged higher in NorAm trading as U.S. Treasury yields slipped from early session highs, providing a boost for the pound as above-target UK inflation and continued BoE hikes are likely to remain key supports amid the current high-for-longer Fed rate outlook.

Fed Chair Jerome Powell's comments at Jackson Hole on Friday, while clearly hawkish in the near-term, have done relatively little to shift rate expectations.

Going into Friday's speech U.S. front-end rate futures had priced no change in rates in September -- where they remained on Monday -- and a near coin-toss for a 25 bp hike in November, which is now at a 65% chance.

In both instances the peak Fed rate is expected to top out near 5.5%, versus 5.83% in February 2024 for the UK.

The slight advantage for sterling in the front-end of the curve grows to 107bp by December 2024, despite Powell's less-dovish outlook, which should keep GBP/USD relatively well bid and cement sterling's leadership among major currencies this year as UK rates trump other economies.

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Source:
Refinitiv IFR Research/Market Commentary

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