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Aug 11 - 11:55 AM

GBP/USD - COMMENT-Sterling Boosted After In-Court U.S. CPI, Bulls Eye UK GDP Thursday

By Paul Spirgel  —  Aug 11 - 10:02 AM

Sterling received a boost, rising to 1.3875 from pre-CPI lows at 1.3820, after mostly in-court U.S. data nW1N2PI004 did not support an earlier-than-currently-expected shift in Fed asset purchase taper tones.

GBP/USD's climb from overnight lows by 1.3804 leans positive for Thursday's UK data set, which includes preliminary Q2 GDP, and a slew of output data, which may will hint at the degree of UK economic recovery from 2020 pandemic-related doldrums.

Though the lion's share of recent attention has been focused on when the Fed will begin to dial back its asset purchase program and kick-off the journey toward normalizing rates, the UK has been keeping pace with the Fed.

At last week’s MPC meeting nL8N2PC4BF, the BoE voted 7-1, Michael Saunders being the one, to begin reducing its asset purchase program.
This hawkish development has muted the pound’s recent decline as UK short-sterling futures 0#FSS: suggest the BoE is likely to hike rates ahead of the Fed in 2022, though U.S. Eurodollar futures 0#ED: hint the Fed is likely to hike at a much faster pace than the BoE once rate increases begin.

Should Thursday's UK data suggest a starker British recovery, UK taper tones are likely to rise, lifting GBP/USD above key resistance at the daily cloud, spanning 1.3902-1.3992, and then putting June 1's 2021 high at 1.4250 in sharper focus.

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Refinitiv IFR Research/Market Commentary


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