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Aug 08 - 11:55 AM

GBP/USD - COMMENT-US Inflation The Last Best Hope For Sterling Bulls

By Paul Spirgel  —  Aug 08 - 10:15 AM

GBP/USD rose on Monday as traders curated positions before U.S. inflation data in two days' time, but cable gains were likely to be limited by recent highs near 1.2300 unless the CPI report shakes expectations that the BoE will remain behind the Fed in hiking rates.

With markets expecting U.S. inflation to remain near recent highs, supporting the Fed's aggressive tightening campaign, while the BoE falls behind even with UK price growth leading the G7, 1.2300 and sterling's 2022 high at 1.2667 remain out of reach.

Fedwatch on Eikon assigns a 69% chance for another 75bp Fed hike on Sept. 21, while BOEWATCH indicates a 71% chance for the BoE to hike 50bps on Sept.
15
.

GBP/USD 25 delta RRs GBP=FXVV indicate the bias is to the downside for sterling from one month to one year, with volatility near 2% across the front-end.

Adding in political uncertainty and the rising cost of energy, owing to the ongoing Ukraine conflict, the prospects for GBP bulls to make a sustained run higher remain remote.

For more click on FXBUZ


Source:
Refinitiv IFR Research/Market Commentary

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