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Jun 10 - 11:55 AM

GBP/USD - COMMENT-Sterling Vulnerable After US Payrolls, 1.28 Remains Upside Obstacle

By Paul Spirgel  —  Jun 10 - 10:00 AM

Sterling is likely to add to Friday's post-payrolls slide, as bulls shy away from last week's failures near 1.28, awaiting UK jobs data Tuesday, Wednesday's U.S. CPI and the Fed's post-decision presser for clues on the upcoming policy path.

GBP/USD limped into NorAm Monday, trading down 0.1% in early NorAm, still feeling the effects of Friday's upside payroll and wage surprise, which diminished expectations of an early Fed rate, thus lifting the dollar versus the pound and other currencies.

LSEG's IRPR projects a 55% chance of a Fed cut in September and just above 80% odds for a November cut, which is a slightly lower than pre-payrolls expectations.

UK rate expectations mirror the Fed's, with September odds for a cut at 60% and a November cut fully priced in.

Of particular interest will be this Wednesday's U.S. CPI.
The Reuters consensus forecast is for May core annual inflation at 3.5%, down slightly 3.6% in April, with the headline rate seen steady at 3.4%.

Barring any surprises in the data, the symmetrical nature of Fed-BoE rate expectations should prevent GBP/USD from venturing far from current levels even as it retreats.
Friday's relatively hot payrolls surprise means recent highs above 1.28 should cap the upside.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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