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Mar 20 - 11:55 AM

GBP/USD - COMMENT- Sterling Relatively Steady Post-CPI Awaiting Fed, BoE Rate Guidance

By Paul Spirgel  —  Mar 20 - 09:50 AM

GBP/USD could face further weakness after UK CPI left cable down -0.2% at 1.2691, but first the market will have to get through the Fed's presentation of its latest rate decision later on Wednesday.

The risk for sterling is that the below forecast UK CPI may prod more BoE members, at Thursday's BoE rate decision, to join dovish MPC member Swati Dhingra in calling for rate cuts to try and bolster Britain's economy.

However, the Fed rate decision will hold significant sway over GBP/USD, and global markets.

While markets, as expressed on LSEG's IRPR page, foresee virtually no chance of a Fed cut today, traders will be focusing on the dot-plot and the post-release presser for clues to the speed and depth of any upcoming rate pivot.

Though UK CPI raises dovish BoE expectations, UK core CPI at 4.5% also leaves the risk that the BoE should continue to maintain its more hawkish stance.
Given the similar Fed stance, GBP/USD is likely to remain relatively firm but capped by its March 8 2024 high at 1.2894.

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Refinitiv IFR Research/Market Commentary


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