Sterling steady ahead of upcoming UK employment and CPI releases
GBP/USD held steady in early NorAm, trading +0.06% at 1.2765, as traders await key UK employment data Tuesday and U.S. CPI data on Wednesday for c.bank policy clues. If these data points hint at steady inflation, it may propel GBP/USD higher.
The recent risk-related selloff in GBP/USD has stalled, and bulls have regained their footing in the wake of the post-payroll swoon.
CFTC data indicates that sterling longs, which had reached a record high at +142k contracts as of July 23, continued to unwind last week, dropping to +74.4k as of August 6. However, the pound's rise from its August 8 trend low at 1.2666 has likely stirred GBP/USD buying as traders refocus on inflation and the BoE's near-term policy path.
Though the BoE has jumped the gun on the Fed, beginning to cut rates on August 1, futures markets continue to price a less dovish BoE, relative to the Fed, for the remainder of 2024 and into 2025.
LSEG's IRPR page indicates a further -43bps by the BoE into year-end 2024, for a total of -68bps in 2024, while the Fed is expected to cut 101bps over the same period, which should provide GBP support going forward.
Should UK employment or CPI surprise lower, support is likely to be found at the recent low at 1.2666, and the June 27 low at 1.2613. Conversely, data that hints at persistent inflation may see sterling bulls reload longs targeting the 2024 high at 1.3044 put in on July 17.
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GBP Chart: https://tmsnrt.rs/3SKSVEE
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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