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Jun 10 - 11:55 AM

GBP/USD - COMMENT-Sterling Benefits From ECB Accommodation And Upbeat US CPI Data

By Paul Spirgel  —  Jun 10 - 10:20 AM

GBP/USD rallied on Thursday after the ECB reaffirmed its accommodative stance and benefiting from benign interpretations of unexpectedly strong U.S. inflation, both of which could be seen as positive for global growth.

The pound rallied from 1.4100 to 1.4157, and EUR/GBP slipped from 0.8629 to 0.8605 after the ECB noted near-term inflation gains would be temporary.

Sterling bulls shrugged off "sausage war" angst, focusing on rising U.S. prices as the successful U.S. vaccine rollout leads to higher growth.
With the UK also benefiting from a rapid vaccine rollout markets are likely to see rising risks of BoE tapering, a positive for the pound.

With the U.S. and UK on parallel paths on vaccine deployments and rate hike outlooks, GBP/USD is unlikely to move dramatically in either direction, as front-end GBP/USD risk reversals GBPVOL= rise toward zero nL2N2NS0QB.

GBP/USD could remain locked within its recent range between its 30-day average, currently at 1.4094, and June 1's 1.4250 high until either the U.S. or UK recovery outlook accelerates away from the other, though position adjustments ahead of the June 16 Fed meeting may shift cable toward recent range limits.
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Refinitiv IFR Research/Market Commentary


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