Sterling hits new 2024 high after US CPI dip hints at lower Fed path
GBP/USD rose to a 2024 peak of 1.2949 and appears poised to rally further after lower-than-forecast U.S. CPI sank U.S. Treasury yields, spurred market betting on a Fed rate cut in September and increased speculation to as many as three rate reductions this year.
Falling real weekly earnings further solidified expectations of at least two rate cuts this year, though below-forecast claims data tempered that mood slightly.
An extraordinary fall in USD/JPY after the CPI data may add to the sterling bid via triangular arbitrage, and the unwinding of GBP/JPY shorts -- which were put on in the initial yen-buying scramble -- which could further support the pound.
A mixed bag of UK data did little to change the steady BoE rate narrative. With Fed-BoE yield advantage turning in the BoE's favor, sterling is likely to continue to rise toward July 2023 highs by 1.2995 and 1.3144 as front-end UK rates keep to a high-for-longer path.
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GBP Chart: https://tmsnrt.rs/3LgoOB0
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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