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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Gains look capped near 0.6800
AUD/USD lost ground for the third session in a row and revisited the 0.6720-0.6715 band following the generalized bearish performance of commodities and ahead of the key release of the Australian labour market report.
EUR/USD keeps the bid tone in place ahead of ECB
EUR/USD added to Tuesday’s advance and rose to new highs around 1.0950 in response to extra weakness in the Greenback and rising expectations prior to the ECB gathering on Thursday.
Gold retreats from record highs, retains the bullish stance
Gold trades flat on the day below $2,470 after touching a new record high above $2,480 in the Asian session on Wednesday. The modest recovery seen in the US Treasury bond yields causes XAU/USD to consolidate its gains.
Ripple extends gains as XRP traders await end of SEC vs. Ripple lawsuit
Ripple (XRP), XRP Ledger’s native token, extended gains by nearly 7% on Wednesday. The sixth largest asset by market capitalization rallied for the tenth consecutive day and erased all losses from the last 99 days.
Divergence in US Indices can’t last for long
US equity indices have been in a state of surprising divergence for over a week, with the Dow Jones and Russell 2000 shooting up, the Nasdaq-100 working its way down, and the S&P500 treading water.