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Apr 08 - 11:55 AM

GBP/USD - COMMENT-Sterling Steady Near Trend Lows Awaiting Further Fed, BoE Policy Clues

By Paul Spirgel  —  Apr 08 - 10:10 AM

GBP/USD traded slightly higher in early NorAm trading, gaining 0.06% at 1.2646, but remained hemmed in loosely by 200-DMA support at 1.2588 and its daily cloud top by 1.2671, and is likely to remain rangebound awaiting further U.S. and UK inflation data.

The pound remains anchored near the lows produced by its 1.2894-1.2540 March-April slide, as Fed rate cut odds have tumbled significantly from early 2024 easing expectations of more than six Fed cuts.

Recent comments by policymakers, including Chair Jerome Powell asserted the Fed is in no hurry to cut rates, which were backed up by price and payrolls data indicating the U.S. economy is indeed running hotter than dour early 2024 forecasts.

Coincidentally, recent more dovish BoE rate expectations, and falling UK inflation data, have been priced in.
And though UK rate expectations have converged with U.S. rates, UK core inflation at 4.5% holds well above the BoE's 2% target, precluding any drastic rate cuts by the BoE.

Wednesday's U.S. CPI data is this week's key event, with risks skewed to upside for GBP/USD.

Should U.S. inflation surprise lower, sterling bulls will target the March 8 2024 high at 1.2894.
A higher read in U.S. prices may provide only fleeting USD support as a reversion to Fed rate hikes appears unlikely, leaving a late-2024 cut in focus.

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Refinitiv IFR Research/Market Commentary


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