In Friday’s London session, the Pound Sterling (GBP) exhibited lateral movement following its recent ascent to a monthly high of 1.2700 on Thursday against the US Dollar (USD). The GBP/USD pair encountered resistance in extending gains as market attention pivoted towards the impending release of the United Kingdom’s Consumer Price Index (CPI) data for April, scheduled for publication on Wednesday.
Investors are eagerly anticipating insights from the UK inflation data, which are expected to shed light on the trajectory of interest rates. Speculation looms regarding the timing of potential interest rate adjustments by the Bank of England (BoE), with divergent views prevailing between the June and August meetings.
The forthcoming CPI figures for April are poised to exert considerable influence on the Pound Sterling’s direction. BoE Governor Andrew Bailey, in response to March’s CPI release on April 17, expressed confidence that inflation in the UK would near its 2% target in the subsequent month. He underscored the unique dynamics of the UK’s household energy pricing system, anticipating a notable downturn in April’s figures.
Turning to global market dynamics, the Pound Sterling’s upward momentum tapered as sentiment veered cautiously amidst developments in the United States. Federal Reserve (Fed) policymakers tempered expectations of imminent rate cuts despite projections of a decline in US inflation data for April.
A series of statements from Fed officials on Thursday hinted at a preference for maintaining the current interest rate framework, citing insufficient evidence of sustained disinflation despite a temporary downturn in inflation figures earlier this year. This hawkish rhetoric dampened speculation surrounding potential Fed rate cuts, with investors now eyeing the September meeting as the earliest opportunity for policy adjustment.
The US Dollar (USD) found respite as the Fed signaled a commitment to higher interest rates, prompting a rebound in the US Dollar Index (DXY) from a monthly low near 104.00 to 104.66. Nonetheless, the index remained poised for a weekly decline.
Concerns lingered over the strength of the US labor market following the release of higher-than-expected Initial Jobless Claims for the week ending May 10 by the Department of Labor. While claims exceeded estimates at 222K, they were below the prior reading of 232K, which marked the highest level in eight months.
