22 May 2024, GBP/USD
An event to look out for today:
21:00 GMT+3. USD - Publication of the Fed meeting minutes
GBPUSD:
The GBP and USD pair remains near 1.2710 in the early Asian session on Wednesday. Bank of England (BoE) Governor Andrew Bailey said that "the next move on rates will be to cut them", adding that he expects April inflation data to fall. The final reading of the UK core CPI is estimated to show a 2.1% y/y rise in April, down from 3.2% at the previous meeting. The core CPI is forecast to fall to 3.6% y/y in April from 4.2% in March. These reports may be more important in determining the timing of the first rate cut of the cycle. Hotter figures could delay the timing of the rate cut and provide some support for the Pound Sterling (GBP).
On the other hand, Federal Reserve (Fed) Governor Christopher Waller, who has been hawkish of late, said on Tuesday that he does not believe further rate hikes are necessary, adding that he would need convincing data before he would support a rate cut anytime soon. Meanwhile, Atlanta Fed President Raphael Bostic said the U.S. central bank should be cautious about the first rate hike. Bostic also said he would "prefer to wait with a rate cut longer to make sure inflation doesn't start to spike."
Fed officials remain cautious about the timing of interest rate cuts, as better-than-expected inflation data has dampened hopes for policy easing. Financial markets expect the first rate cut won't come until September at the earliest, and there will be two more quarter-percentage-point cuts before the end of the year, according to CME Group's FedWatch tool. This, in turn, could lead to a rise in the US dollar and limit the pair's growth in the near term.
Trading recommendation: Trade predominantly with Buy orders from the current price level
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