Has the pound rally run its course?
Pound gains as BoE seen cutting rates late
Economy improves but inflation may further slow
A Labor victory could make the BoE’s job easier
As rate cuts come forward, pound may weaken
Sticky core inflation weighs on rate cut bets
We are nearly halfway through 2024 and the pound is holding the first place among the major currencies in terms of year-to-date performance.
![](https://www.xm.com/wp-content/uploads/2024/05/YTDperf_290524.png)
This is because up until recently the BoE was seen as the major central bank that could be forced to press the rate cut button last, and fewer times than others. However, the dovish stance of the BoE at its latest gathering prompted investors to reconsider their view and even assign a decent chance for a first quarter-point cut in June, at a time when the stickiness in US inflation and the Fed’s ‘higher for longer’ mantra pushed the timing of the first expected rate cut by the Fed beyond September.
That didn’t last for long though as the hotter-than-anticipated UK inflation data for April, and especially the stickiness in underlying price pressures, prompted investors to scale back again their BoE rate cut bets. Currently, they are pricing in around 30bps worth of reductions by December, with the probability of a 25bps cut rising above 50% only in September.
![](https://www.xm.com/wp-content/uploads/2024/05/BoErates_290524.png)
PMIs point to further cooling in price pressures
What may have also helped market participants to keep the BoE implied path higher than some other central banks, and thereby the pound supported, was the improvement in economic activity. After slipping into recession during the second half of 2023, the UK economy rebounded by 0.6% in Q1, with the UK PMIs suggesting that the recovery likely continues at a decent pace in Q2.
![](https://www.xm.com/wp-content/uploads/2024/05/PMIvsGDP_290524.png)
However, the PMIs also revealed that prices charged inflation fell to its lowest level since February 2021 in May, which suggests that the upcoming CPI numbers, due out on June 19, could reveal further softening in inflation. This may encourage participants to bring forth their rate cuts again, and thereby hurt the pound.
![](https://www.xm.com/wp-content/uploads/2024/05/UK_CPIs_290524.png)
Just the day after the data, the BoE gathers to decide on monetary policy and investors will be eager to see whether they will get signs for an earlier rate cut, especially if the CPIs indeed reveal a further slowdown.
Pound awaits elections as well
Nonetheless, with the general elections scheduled just two weeks after the decision, the Bank is unlikely to rock the boat. Policymakers may prefer to wait for the outcome of the election, as the two opposing sides hold different views on fiscal policy. For example, the Conservatives are advocating lower taxes, while the Labor party has been portraying itself as the party of fiscal responsibility.
Therefore, a Labor victory, as the opinion polls are currently suggesting, could make the BoE’s work easier, allowing it to cut interest rates much earlier than currently expected. According to remarks by the Chief Business Economist at S&P Global Market Intelligence, the latest PMI readings support the view that the BoE will start cutting interest rates in August if upcoming data continues to move in the right direction.
Is sterling running out of fuel?
Ergo, combining all the above, the pound’s rally may be at its final stages. The British currency may eventually come under selling pressure, especially against the aussie, as the RBA is not expected to press the cut button this year. On the contrary, due to the stickiness in Australian inflation, the market is assigning an around 20% chance for a quarter-point rate hike by September.
From a technical standpoint, pound/aussie has been in a recovery mode after testing the key zone of 1.8900. However, the pair continues to trade below the short-term downtrend line drawn from the high of March 5, which means that there is a decent chance for the bears to take charge again soon and push the action back down to 1.8900.
![](https://www.xm.com/wp-content/uploads/2024/05/GBPAUDDaily_290524.png)
관련 자산
최신 뉴스
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.