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Volatile GBP Following CPI, BOE Decision Now Takes Focus

FOREX
  • An initial knee jerk higher for sterling, on the back of stronger than expected inflation, was quickly pared as markets weighed the potential impact of more aggressive tightening from the BOE going forward as well as short-term positioning adjustments ahead of tomorrow’s rate decision. GBPUSD traded as low as 1.2691 from a 1.2802 peak but late greenback weakness has seen the pair rise back to around 1.2775 ahead of the APAC crossover.
  • GBPUSD technical bulls remain in the driver’s seat and short-term pullbacks are considered corrective. The rally last week confirmed a clear break of 1.2680, the May 10 high and a bull trigger. This strengthens bullish conditions and opens 1.2849, a Fibonacci projection.
  • Elsewhere in G10, the Swedish Krona is the strongest performer, marking a swift reversal from the fresh all-time lows against the Euro on Tuesday. NZDUSD has also risen 0.75% on Wednesday.
  • The modest greenback weakness in the aftermath of Fed Chair Powell’s semi-annual monetary policy report bolstered EURUSD to fresh six-week highs. The broad-based single currency strength also saw EURJPY print fresh trend highs and extend the move above the 155 mark. The 0.77% advance stands out in G10 fx, with the pair having recently confirmed a resumption of the longer-term uptrend. The focus remains on a material break of 155.59, a Fibonacci projection. 156.23 is the next topside target, the 2.00 projection of the Mar 20 - 21 - Apr 6 price swing.
  • A packed central bank schedule on Thursday with the SNB, Norges Bank and the Bank of England all deciding on rates.
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