Sterling prepares for a satisfying summer
GBP/USD rallied to a 2024 peak of 1.2975, undeterred by above-forecast U.S. producer price inflation as cable extended its gradual climb toward July 2023 highs above 1.30.
In the wake of soft U.S. CPI on Thursday, the market appears to be under the sway of more dovish Fed policy expectations -- no matter the PPI -- which lifted GBP/USD from lows near 1.28 to its 11-1/2 month high at 1.2975.
If future U.S. data continue to hint at employment declines and a diminishing rate of inflation, sterling is likely to continue rising toward July 2023 highs by 1.3144.
With Fed policy expectations fairly well known, after Wednesday's dip in core and headline CPI, the wild cards for sterling bulls are likely to be UK data and BoE guidance.
While there had been a pickup in dovish BoE expectations, as evidenced by the recent 7-2 vote to hold rates, with an additional vote to cut rates, the June BoE statement noted employment remains tight.
Recent wage data supported that notion, which may prohibit the BoE from moving earlier and deeper than the Fed on rate cuts, which is likely to make for a satisfying summer for GBP bulls.
For more click on FXBUZ
Sterling Chart: https://tmsnrt.rs/4f2LLFi
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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