GBP: Bulls get a lift from UK CPI report – Rabobank
|The slightly firmer than expected release of UK CPI inflation this morning has given GBP bulls another lift. Although the headline number at 2.0% remained at the BoE’s inflation target for a second consecutive month, services CPI inflation remained at a worryingly sticky 5.7% y/y which provides a headache for the doves on the MPC, Rabobank's FX strategists note.
Cable pops above 1.30 for the first time since last July
“As the market pared back its expectations for an August rate cut, Cable popped above the 1.30 level for the first time since last July and EUR/GBP dipped further below the 0.84 level, to levels not seen since 2022. Having edged past the USD earlier this month, the Pound Sterling (GBP) continues to hold the position as best performing G10 currency in the year to date as the markets takes a positive view on the policies announced so far by the UK’s new Labour government.”
“It would be inaccurate to credit the Labour government entirely for the better tone in the GBP. It was the second best performing G10 currency in 2023 (after the CHF). In our view the GBP has been slowing picking itself up after the hit that came from the market chaos triggered by the short-lived government of Truss in September 2022.”
“We have been forecasting a slow grinding recovery for GBP vs the Euro for some time. The currency pair has now hit our 0.84 target. In our view, this opens the door to a move towards 0.83, which we have brought forward to a 6-month view. While GBP is also on the front foot vs. the USD, we expect the Greenback to be subject to bouts of strength in the coming months particularly if Trump were to win the US election. Therefore, we see risk for dips in cable potentially to 1.26 on a 3-to-6-month view.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.