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17/05/24
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GBP Inches Down, Focus on Fedspeak
On Friday, the British pound was slightly lower and GBP/USD traded at about 1.2648, down 0.14% in the European session.
The pound has had a good week and it gained 1% versus the US dollar. The inflation release on Wednesday showed CPI in April dropping, reversing the past several months’ trend. Inflation’s unexpected stickiness has delayed the Federal Reserve’s rate cut and the decline in inflation in April fueled expectations for a rate cut.
This pushed equity markets up and the US dollar down, as GBP/USD on Wednesday jumped 0.75%.
The Federal Reserve has not yet been willing to shift its policy of “higher for longer” and has kept rates steady for six consecutive times. Strong US economic data and the unexpected inflation rise in Q1 have delayed plans to cut rates.
As inflation has dropped to 3.2%, the Bank of England is under pressure to cut rates. Although the route to getting to the 2% target will likely be bumpy, the labor market is showing signs of easing, and this supports a rate cut.
The meeting in June will likely be interesting, and the markets are pricing in a 50% chance of a rate cut or a hold.
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