GBP/USD takes a breather around 1.2750 | 14 June 2024

Event to pay attention to today:

17:00 GMT+3. USD - UoM Consumer Sentiment

GBPUSD:

GBP/USD is declining near 1.2760 following three consecutive sessions of gains early in the Asian session on Friday. Later on Friday, the preliminary Michigan consumer sentiment report will be released.

The US Federal Reserve signalled it will cut its key interest rate just once by 25 basis points (bps) by the end of 2024 despite weakening inflation, according to the dot plot. The Federal Reserve's revised outlook led to a rise in the US dollar and put pressure on GBP/USD despite weaker-than-expected US economic data released on Thursday.

The US Producer Price Index (PPI) rose 2.2% in May, up from April's 2.3% increase (revised from 2.2%), below market expectations of 2.5%, according to the US Bureau of Labor Statistics' report on Thursday. The core producer price index rose 2.3% year-on-year in May, below expectations and the previous reading of 2.4%. On a month-on-month basis, the producer price index fell 0.2% in May, while the core producer price index was unchanged at 0%.

Additionally, initial jobless claims for the week ended 6 June rose by 242 thousand from 229 thousand in the previous week. This figure was above the market consensus of 225k.

There is growing speculation that the Bank of England (BoE) will start cutting interest rates at its August or September meeting, which is putting pressure on the Pound Sterling (GBP). Traders have raised bets on a Bank of England rate cut due to stagnant monthly UK Gross Domestic Product (GDP) data for April. "While there are some tentative signs of cooling in the labour market, services sector inflation remains stubbornly high. It is likely that the MPC will want to wait for the next set of forecasts and a few more data points before embarking on its first rate cut," said KPMG UK Chief Economist Yael Selfin.

Trading recommendation: We follow the level of 1.2750. On rebound we take Buy positions, on fixation below - Sell.

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