GBP/USD bulls ignore mixed BoE clues to prod 1.2450 as June Fed rate hike appears elusive
|- GBP/USD stays on the front foot for the second consecutive day after reversing from weekly top.
- Easing British labor shortage contrasts with housing market pressure to challenge BoE rate speculations.
- Fed’s June rate hike slips off the table with July likely being the last rate hike.
- Cable buyers may have limited upside room as UK politics, BoE clues probing Pound Sterling optimists.
GBP/USD buyers occupy driver’s seat around 1.2450, despite marking a slow run towards the north heading into Thursday’s London open. In doing so, the Cable pair buyers cheer the receding odds of a Fed rate hike in June while early signals for the Bank of England’s (BoE) interest rate guide appear mixed.
Earlier in the day, the UK’s Recruitment and Employment Confederation (REC) released a survey, funded by the global quant giant KPMG, saying that Britain's labor market cooled further in May as starting salaries for permanent staff rose at the weakest pace in over two years. It should be noted that the recruiters included in the survey are the ones being closely watched by the Bank of England (BoE) and hence the results appear more important for the GBP/USD pair traders.
On the contrary, another poll of the Royal Institution of Chartered Surveyors (RICS) hints that the measure of new buyer inquiries rose to a net balance of -18, the least negative figure since -14 in May 2022, and up from -34 in April, per Reuters.
Elsewhere, UK Prime Minister Rishi Sunak fails to mark any major achievements during this diplomatic US visit and prods the GBP/USD buyers. “Rishi Sunak confirming he isn’t talking about a UK-US free trade deal with Joe Biden is the final nail in the coffin of promises he and others made to win the 2016 Brexit referendum,” reports UK Mirror.
Apart from the British catalysts, the latest increase in the market’s bets on the Federal Reserve’s 25 bps rate hike in July increased, even as the June Federal Open Market Committee (FOMC) is likely to keep the rates unchanged, also challenge the GBP/USD upside.
That said, the risk profile soured and added negatives for the GBP/USD, which it ignores, on the latest Organisation for Economic Co-operation and Development (OECD) report that said that the global economy is set for a weak recovery over the coming years as persistent core inflation and tighter monetary policy weigh on demand. The OECD report also mentioned, “UK growth of 0.3% in 2023 and 1.0% in 2024 (previously -0.2% in 2023 and 0.9% in 2024).”
Amid these plays, the US 10-year bond coupons remain mostly unchanged at 3.79% by the press time whereas the two-year yields grind higher to 4.54% as we write. While portraying the market’s mood, Wall Street closed mixed and S&500 Futures struggle for clear directions.
Looking ahead, a light calendar in the UK and the US, apart from the weekly Initial Jobless Claims, may fail to provide any major challenge to the Pound Sterling buyers. However, risk catalysts and the bond market moves should be closely observed for clear directions.
Technical analysis
GBP/USD grinds within a 100-pip broad one-month-old symmetrical triangle, currently between 1.2500 and 1.2400, as bulls flex muscles.
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