GBP/USD fell to new session lows in NorAm trading at 1.2332, off early NorAm highs by 1.2376, after firm U.S. GDP and core PCE price data kept high-for-longer Fed rate expectations that could cap sterling at 2023's highs, especially after disappointing UK retail sales.
The U.S. data further diminished year-end 2023 Fed rate cut expectations to 18bp of cuts from Wednesday's close projecting 26bp of easing by December.
That's a sharp move from 59bp in cuts foreseen on May 16 and 84bp earlier in the month.
While sterling will gain and maintain a rate advantage in Q4 2023, as the BoE deals with persistently high inflation, front-end rate convergence and recent dour British data has piqued concerns that slower economic growth and persistent price growth will hurt the UK economy.
With inflation-related BoE hikes losing efficacy, and retarding UK economic recovery, sterling bulls are likely to abandon recent higher yield-related longs 1096742NNET and search for returns untarnished by excessive price growth.
That could keep GBP/USD capped ahead of 2023 highs by 1.2679.
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