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Jun 05 - 11:55 AM

GBP/USD - COMMENT-Sterling Eyes Resistance Above 1.28 After Below Forecast ADP

By Paul Spirgel  —  Jun 05 - 09:40 AM

GBP/USD rose to a session high of 1.2795 and may test the recent trend high at 1.2818, after below-forecast U.S. ADP data hinted U.S. inflation may resume moving toward the Fed's 2% inflation target, which could facilitate faster and deeper-than-expected Fed rate cuts.

The dollar's recent relative malaise has come as Fed officials, led by Chair Jerome Powell, took potential rate hikes off the table.

Adding to the dollar's doldrums were less-dovish UK CPI data and BoE rhetoric that pushed expectations for early UK rate cuts down the road.

LSEG's IRPR now indicates near-60% odds for a September rate cut, where June had been on the table in early May, prior to above-forecast UK CPI on May 22.

For now, GBP/USD appears to be capped just above 1.28, ahead of the 2024 high at 1.2894.
However, the recovery of 2024 Fed rate-cut expectations to -46bp currently from -35bp in May could erode the recent resistance.
If upcoming U.S. data remains soft, GBP/USD bulls may test recent trend highs, putting July 2023 highs by 1.30 in focus.

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Refinitiv IFR Research/Market Commentary


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