GBP/USD loses ground after Fed rate decision | 13 June 2024

Event to pay attention to today:

15:30 GMT+3. USD - Producer Price Index

GBPUSD:

The GBP/USD pair is experiencing a slight decline near 1.2795 following a pullback from three-month highs of 1.2860 during the early Asian session on Thursday. A negative surprise in the US inflation report (Consumer Price Index) for May is exerting pressure on the dollar, yet the aggressive stance of the Federal Reserve (Fed) is preventing a further decline in the dollar's value.

US inflation remained unchanged in May, resulting in a decline in the US Dollar (USD). The consumer price index fell to 3.3% year-on-year in May from 3.4% in April, below the market consensus forecast of 3.4%, according to the US Bureau of Labor Statistics (BLS). The core consumer price index, which excludes volatile food and energy prices, rose 3.4%, compared with an increase of 3.6% in April and an estimate of 3.5%. On a monthly basis, the CPI remained unchanged, while the core CPI rose 0.2% in May.

Furthermore, the Federal Open Market Committee (FOMC) decided to maintain the benchmark lending rate in the 5.25%-5.50% range for the seventh consecutive time at its June meeting on Wednesday. According to the FOMC's latest economic projections, only one rate cut is expected this year, up from three in March. The so-called "dot plot" indicated that the average number of FOMC officials revised their forecast for the federal funds rate from 4.6% to 5.1% by the end of 2024.

Futures traders are currently pricing in a 73% probability of a Fed rate cut in September, up from 53% prior to the release of CPI data, according to CME's FedWatch tool. Later on Thursday, investors will be monitoring the weekly US jobless claims data, as well as the Producer Price Index (PPI) and a speech from the Fed's John Williams.

In contrast, the Office for National Statistics (ONS) reported on Wednesday that economic growth in the UK came to a halt in April. UK Gross Domestic Product (GDP) was 0% in April, following a 0.4% increase in March. This was in line with market expectations. The Bank of England (BoE) will convene on 20 June to determine the next course of action with regard to monetary policy. Investors anticipate that there is little likelihood of a rate cut in June and are instead focusing their expectations on the possibility of an August or September reduction.

Trading recommendation: Trading mainly by Sell orders from the current price level.

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