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May 24 - 09:55 AM

ANZ: GBP/USD Rally Seen a Tad Over-Extended Amid Dovish BoE Outlook

By eFXdata  —  May 24 - 08:00 AM

Synopsis:

ANZ suggests caution towards the recent rally in GBP/USD, citing over-extension amid a potentially more dovish Bank of England (BoE).

Key Points:

  • Consumer Price Support: The GBP has seen some uplift on the G10 crosses from firmer CPI prints in March and April, which temporarily buoyed its value.
  • BoE's Dovish Shift: Indications from recent BoE MPC meetings hint at an evolving dovish tilt, which could become more apparent at the upcoming June meeting.
  • Potential Vulnerability: Despite the recent strength, the GBP may be over-extended, especially considering the dovish leanings of the MPC and the potential onset of more aggressive easing cycles starting in June.

Conclusion:

While recent inflation data have provided temporary support for the GBP, ANZ views the currency's rally as potentially overdone. The expected dovish shift by the BoE could undermine the GBP's recent gains, making it vulnerable, especially against other currencies, as global easing cycles begin to intensify.

Source:
ANZ Research/Market Commentary

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