Sterling steady after key PCE data awaiting Fed, BoE policy clues
GBP/USD held onto slight gains on Friday after U.S. PCE data did little to change Fed policy expectations, putting market focus back on the BoE and the potential for an August rate cut that could damage the pound.
Cable was up +0.14% at 1.2865, helped by the fall in U.S. yields after the PCE data with little to threaten Friday's tight 24-pip range.
The slowdown in personal income and consumption growth likely added downside pressure to U.S. Treasury yields, but other than headline annual PCE price growth, there was no sign of falling inflation, thus having little effect on GBP/USD and the dollar broadly.
A deluge of GBP/JPY selling and shifting in BoE policy expectations have put the pound under pressure, with cable sliding from its 2024 high at 1.3044, struck on July 17.
Cross-selling may make for a continued bumpy ride while BoE rate cut expectations for Aug. 1 hover around 50%.
Growing expectations of a cut on Aug 1 could push GBP/USD below support at 1.2829, the 50% Fib of 1.2613-1.3044, which would shift momentum to sterling bears exacerbating a further unwind of GBP longs.
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GBP Chart: https://tmsnrt.rs/3A94E9x
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)
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