GBP/USD holds in mid-1.2500s despite PM Johnson’s looming confidence vote, eyes US CPI later this week By Frank_Macro GBPUSD Politics UnitedKingdom
the currency outperforming its G10 peers as UK markets reopen following a long week of celebrations for the Queen’s Platinum Jubilee. Yield differentials appear to be one factor behind sterling’s outperformance, with UK 2-year yields last up nearly 7 bps on the day as UK bond markets reopen for the first time since last Wednesday.
GBP/USD was last trading with gains of about 0.5% on the day close to the 1.2550 level, having rebounded from a strong area of support in the 1.2460-80 region . Analysts are framing a potential defeat for Johnson later in the day as a potential positive, or at least not a negative, for sterling, given the PM’s waning authority in recent months amid the ongoing “partygate” scandal where the PM and his staff incurred a number of policy fines over breaching lockdown rules.
Aside from UK political machinations, things are set to be quiet for GBP/USD traders until Friday, when US Consumer Price Inflation data for May is set for release. Until then, there is a chance FX markets remain locked within recent ranges, suggesting GBP/USD remaining between the mid-1.2400s to upper 1.2600s. However, should Friday’s US inflation data then point to a further easing of price pressures, some analysts expect USD weakness to come back to the fore.
Easing US price pressures would come as a welcome development for the Fed, not only reducing the chance of what would be a fourth consecutive 50 bps rate hike in September but also reducing the pressure on the Fed to keep aggressively lifting
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