17 June 2024, GBP/USD
GBPUSD:
The GBP and USD pair is trying to capitalize on Friday's modest rebound from the mid-1.2600s or near one-month lows and is fluctuating in a narrow range on the first trading day of the new week. Spot prices are now anchored at 1.2680 and could fall further amid bullish sentiment around the US Dollar (USD).
The US Dollar Index (DXY), which tracks the USD against a basket of currencies, is near its highest level since early May, reached on Friday amid last week's hawkish Federal Reserve (Fed) decision. In the so-called dot plot, policymakers forecast only one interest rate cut in 2024, up from three in March. This supports rising US Treasury yields and serves as a tailwind for the dollar, confirming the negative outlook for GBP/USD.
Meanwhile, weaker-than-expected US consumer and producer price data released last week pointed to signs of easing inflationary pressures. In addition, an unexpected drop in US import prices has further strengthened the inflation outlook, which, along with a sharp deterioration in US consumer sentiment in June, keeps hopes alive for a first Fed rate cut in September and a second cut in December. This could limit US Dollar gains and help limit GBP/USD losses.
Market participants, meanwhile, expect that more sustained price pressures in the UK could force the Bank of England (BoE) to keep interest rates at current levels for a while longer. This could deter bearish traders from aggressively betting on the British Pound (GBP) ahead of this week's UK CPI report. In addition, the upcoming UK General Election on July 4 forces some caution before positioning for further GBP/USD declines
Trading recommendation: Trade mainly with buy orders at the price level of 1.2720. We consider sell orders at the price level of 1.2655.
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