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May 20 - 01:55 PM

GBP/USD - COMMENT-Sterling Bulls Pause At Highs As UK CPI, Fed Minutes Loom

By Paul Spirgel  —  May 20 - 12:00 PM

GBP/USD rose on Monday, moving slightly above Friday's two-month high at 1.2711, but bulls appeared reluctant to push further ahead of plentiful Fedspeak this week, as well as key UK CPI data and the minutes of the Fed's April 30-May 1 FOMC meeting on Wednesday.

data last week affirmed Fed musings that the next move will be to ease, lowering U.S. Treasury yields and the dollar.
However, rate cut expectations for September and the full year have receded slightly, helping to steady the U.S. currency.

The pullback in rate-cut expectations may be related to risk management ahead of UK CPI and the Fed minutes.

While most developed market central banks are currently engaging in a follow-the-Fed strategy, that could change depending on upcoming data.

If UK inflation continues its deceleration, as Reuters consensus forecasts predict, prospects for a June BoE rate cut as well as an August move would rise, sapping GBP/USD of its recent vigor and putting 10-DMA support at 1.2596 and the May 9 flash low at 1.2446 in sharper focus.

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Refinitiv IFR Research/Market Commentary


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