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May 29 - 11:55 AM

GBP/USD - COMMENT-Sterling Slips From Tuesday's High, Awaiting Inflation, Rate Clues

By Paul Spirgel  —  May 29 - 09:55 AM

GBP/USD backed away from Tuesday's nine-week high of 1.2801, but the outlook remained upbeat for the pound as it held within striking distance of the 1.2894 high it struck on March 8 as symmetrical BoE-Fed rate expectations rob the dollar of any yield advantage.

Longer-term daily moving averages put sterling's rate-related rise in perspective as the distance between spot and the 100-DMA at 1.2635, and 200-DMA at 1.2541 remains wide given diminishing dovish Fed and BoE outlooks.

Sterling's recent rise following above-forecast UK CPI may be tested on Friday after U.S. April PCE index data, which will provide an update on the Fed's progress in bringing U.S. inflation down to target.

Should the data come in steady, as forecast, markets are likely to push Fed rate cut expectations further out the curve, which should keep GBP/USD anchored near current levels.

A rise in the data could spur Fed rate hike expectations higher which would weigh on GBP/USD, while a softer than forecast print might revive bets on quicker U.S. cuts, boosting the pound toward the 2024 high at 1.2894.

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Refinitiv IFR Research/Market Commentary


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