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18/06/24
206
GBP Drops Ahead of UK Inflation
On Tuesday, the British pound inched down, and GBP/USD traded at about 1.2683, down 0.16% for the day in the European session.
On Tuesday, the US will release retail sales, while there are no UK events. On Wednesday, the UK will release the inflation report for May.
In April, US retail sales were unchanged but are expected to rise to 0.2% m/m in May. Retail sales are expected to drop to 2.8% yearly, compared to April’s 3.0%.
The Federal Reserve will be watching today’s retail sales data closely, hoping that any improvement will be mild, as the economy weakening would support reducing interest rates.
The Federal Reserve has managed to slash inflation dramatically, although the final challenge to achieve the 2% target is proving to be difficult. Fed policymakers will likely implement an initial rate cut even if inflation is still higher than the target, providing they are confident that inflation will continue to drop.
According to the CME’s FedWatch tool, the markets have priced in a rate cut of 0.5% in Sept. at 60%. Although that is up from 53% the prior week, it indicates that there is a strong possibility that the Fed won’t change its stance until Nov. or Dec.
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