GBP/USD refreshes weekly high at 1.2450 amid mixed Fed views about interest rate guidance

• GBP/USD has printed a fresh weekly high at 1.2450 as Fed policymakers are divided over interest rate guidance.
• The US Dollar Index (DXY) is showing some strength after dropping sharply to near 104.13 as the focus shifts to US Employment.
• UK’s headline inflation decelerated to 8.7%, finally ditched double-digit territory but remained well-above estimates in April.

The GBP/USD pair is facing stiff barricades around 1.2450 in the Asian session. The Cable has printed a fresh weekly high at 1.2450 but is facing hurdles in extending recovery further amid mixed views from Federal Reserve (Fed) policymakers about interest rate guidance for June’s monetary policy meeting.

S&P500 futures have added more gains in early Tokyo on hopes that the US debt-ceiling proposal will get a clearance from in voting at Congress. Market mood is turning risk-on as investors have started digesting one more interest rate hike from the Federal Reserve (Fed) in its June monetary policy meeting.

Mixed views about interest rate guidance by Fed policymakers are creating chaos in financial markets. Cleveland Fed Bank President, Loretta Mester, in an interview with Financial Times, cited “I don’t really see a compelling reason to pause — meaning wait until you get more evidence to decide what to do.” While Fed Governor Philip Jefferson said in a speech on Wednesday that pausing rate hikes at the next FOMC meeting would offer time to analyze more data before making a decision about the extent of additional tightening. He added that a pause does not mean that rates peaked.

The US Dollar Index (DXY) is showing some strength after dropping sharply to near 104.13. It seems that investors are shifting their focus back to the United States Employment data. As per the estimates, the US economy added fresh 170K personnel in the labor market lower than the prior addition of 296K.

On the Pound Sterling front, stubborn United Kingdom inflation is empowering the case of one more interest rate hike by the Bank of England (BoE). Inflationary pressures in the UK economy are not easing as expected due to higher food inflation and labor shortages. UK’s headline inflation decelerated to 8.7%, finally ditched double-digit territory but remained well-above estimates in April.

Economists at Nomura cited “Following the latest inflation print, we have changed our call and now see the BoE raising rates by 25 bps at each of the next three meetings.” They further added “We thus forecast peak rates at 5.25% for the BoE.