Key points
- GBP/USD trades in proximity to Friday’s 60-week peak
- UK CPI numbers for May, Bank of England’s policy meeting outcome in focus
- Dollar eyes Fed Chair Powell’s testimony
GBP/USD was mostly steady on Monday, being not far from recent 60-week peak, as market players were expecting congressional testimonies by Fed Chair Jerome Powell later in the week as well as Bank of England’s policy decision on Thursday.
The BoE is widely expected to hike interest rates further, by 25 basis points, as inflation in the UK still remains several times higher than the central bank’s target.
“There is expectation and there is a need as well,” Moh Siong Sim, a currency strategist at Bank of Singapore, was quoted as saying by Reuters.
“UK stands out as the country with a still problematic inflation story, and the Bank of England is under pressure to respond to the inflation problem.”
The UK’s inflation data for May will be released a day prior to the BoE’s decision. Market consensus points to a slowdown in annual headline inflation to 8.5% from 8.7% in April and a steady annual core CPI inflation at 6.8%.
Meanwhile, market players were also looking for further clues regarding the Federal Reserve’s interest rate path this year, after the US central bank left borrowing costs without change last week, but indicated two additional rate hikes by the end of 2023.
“The Fed’s hawkish hold means that the bar to a hike next month is low,” Marc Chandler, chief market strategist at Bannockburn Forex, commented, while adding market players were skeptical about the Federal Reserve’s forecast for two additional rate increases.
Many investors believe the Fed may conclude its tightening cycle in July. Markets are now pricing in a 72% chance of a 25 basis point interest rate hike next month and no more hikes after that, according to CME’s FedWatch tool.
Federal Reserve Chair Powell is to testify at the House Financial Service Committee on Wednesday and at the Senate Banking Committee on Thursday, where he is expected to offer hawkish remarks.
As of 9:15 GMT on Monday GBP/USD was inching down 0.01% to trade at 1.2816. Last Friday the major Forex pair went up as high as 1.2848. The latter has been the pair’s strongest level since April 22nd 2022 (1.3035).
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
