GBP/USD could be due for a snap back – SocGen

FXStreet Insights Team FXStreet

The Pound faces another pulsating week. Economists at Société Générale analyze GBP outlook.

A drop in core inflation could rein in the pessimism about the terminal rate exceeding 6.5% next year

The release of UK CPI on Wednesday will be closely watched in light of the sea change in expectations for the BoE. The strong wage data last week and agreement by the government to increase public sector pay by around 6% cemented expectations for 50 bps in August.

GBP/USD has not been this overbought since August 2020 so could be due for a snap back.

A drop in core inflation may not temper what happens with bank rate in August but could rein in the pessimism about the terminal rate exceeding 6.5% next year.

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