GBP/USD extends the upside above 1.2700, focus on UK-US PMI data

The GBP/USD pair extends the rally near 1.2720 during the early Asian section on Thursday. The uptick of the major pair is bolstered by the hotter-than-expected UK CPI inflation data, which slashed June rate cut bets from the Bank of England (BoE). Later in the day, the flash Purchasing Managers Index (PMI) reports from the UK and US will be released. 

The minutes from the recent policy meeting of the Federal Open Market Committee (FOMC) released Wednesday showed that the officials expressed more concern about inflation as it was more stubborn than expected to start in 2024, making the Fed lack the confidence to move forward on interest rate cuts. Fed Chair Jerome Powell highlighted last week that the Fed will “need to be patient and let restrictive policy do its work” as inflation remains high. Investors see nearly 60% odds of first-rate cuts from the Fed in September, according to the CME FedWatch Tool. 

On the other hand, inflation in the UK cooled down less than expected in April, prompting investors to lower their bets on the BoE rate cut next month. The nation’s Consumer Price Index (CPI) rose by 2.3% YoY in April, compared to 3.2% in March. This figure registered the lowest level since July 2021, the Office for National Statistics reported Wednesday. The hotter UK CPI inflation boosts the Pound Sterling (GBP) and creates a tailwind for the GBP/USD pair. The markets slashed the possibility of a BoE rate cut in June to just 18%, down from 50% on Tuesday.