The British pound is almost unchanged on Monday. GBP/USD is trading at 1.2704 in the European session at the time of writing.
The pound is coming off a strong week, with gains of 1.4%. GBP/USD touched a high last week of 1.2711, its highest point since March 21.
The markets are keeping a close eye on Wednesday’s UK inflation report. April CPI is expected to fall all the way to 2.1%, down from 3.2% in March. This would be a significant achievement for the Bank of England, which has slashed inflation from double digits and has made a priority of bringing inflation back down to the 2% target.
Broadbent Hints at Summer Rate Cut
Taking a page from the European Central Bank which has signaled a rate cut in June, Bank of England Deputy Governor Broadbent said today that a rate cut in the summer was possible. Broadbent said that rates would have to come down “at some point” but that would depend on wage growth and services inflation cooling as the BoE has projected. Wednesday’s inflation report will certainly be a key factor in the central bank’s rate path.
BoE Governor Bailey will speak at the event on Tuesday and the markets will be listening closely. If Bailey also signals that a summer rate hike is a strong possibility, the British pound could lose ground.
There are no economic releases out of the US today, which leaves the focus on a host of FOMC members, who will make public remarks today and Tuesday. The markets will be looking for some hints about future rate policy. The Federal Reserve is widely expected to hold rates at the June meeting, with a 65% probability of a cut in September, according to the CME’s FedWatch.
GBP/USD Technical
- GBP/USD is putting pressure on support at 1.2686. Below, there is support at 1.2660
- 1.2727 and 1.2753 are the next resistance lines