Sterling bulls hungry for data to fuel more gains
GBP/USD held firm near recent trend highs by 1.34 in early NorAm trading, and appeared poised to trek higher with help from diverging UK-U.S. rate expectations, though bullish traders were awaiting more data to fuel another round of gains.
Today's UK GDP, home prices and business investment data did little to change views on the Fed and BoE.
LSEG's IRPR is currently indicating 73bp of Fed cuts by year-end 2024, while the BoE is expected to cut 36bp over the same period. The UK yield advantage over the U.S. is expected to grow further as STIR futures are pricing a further 192bp of Fed cuts and 150bp of BoE cuts by year-end 2025.
The reality of currency performance thus far in 2024 is high-yielders are outperforming. Year-to-date GBP/USD has gained 5.2%, with sterling leading other majors' performance versus the dollar, on the back of persistently high UK inflation that has kept UK rates high.
That should keep GBP/USD anchored near recent highs as central bank forecasts indicate a rise in UK inflation into year-end.
The key risk for GBP/USD traders lies in the data. Should inflation or growth surprise lower, BoE members are likely to flip to a more accommodative stance, which would put September lows by 1.30 and August lows sub-1.27 in sharper focus.
For more click on FXBUZ
GBP Chart: https://tmsnrt.rs/4gKWwgo
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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