GBP/USD: Longs stretched but acceleration to 1.30 may gather momentum depending on Wednesday’s.

GBP/USD pauses after a 1.95% gain last week. Economists at Société Générale analyze GBP outlook ahead of the UK Consumer Price Index (CPI) data and the Bank of England (BoE) meeting this week.

A hawkish split with some members preferring 50 bps for the first time since January is not impossible

The acceleration in UK core inflation to a new high of 6.8% in May and wages ex-bonuses to 7.2% YoY in April sparked a dramatic repricing of the implied BoE terminal rate in the past two weeks from 5% to 6%. Whether we ultimately get there remains to be seen, but the bank could double down in the statement that tighter policy is required to rein in second-round effects. Compared to the UK, core inflation in the Eurozone and the US is 5.3%.

A hawkish split with some members preferring 50 bps for the first time since January is not impossible if core CPI surprises to the upside on Wednesday, the day before the rate decision.

We are mindful of technically stretched levels in Sterling and profit talking, but won’t rule out further appreciation just yet of GBP/USD towards 1.30 and depreciation of EUR/GBP towards 0.85 and 0.8475 (1.18 GBP/EUR).

EUR/USD stays on the back foot below 1.0950, ECB-speak eyed

EUR/USD is trading on the defensive below 1.0950 in early Europe this Monday. The pair is weighed down by the US Dollar bounce and risk aversion, as investors digest US-Sino headlines amid mounting Chinese growth fears. ECB-speak will be in focus. US markets are closed on account of Juneteenth.

EUR/USD News

GBP/USD holds steady above 1.2800 amid cautious markets

GBP/USD is attempting a bounce above 1.2800, resuming its recent uptrend toward 14-month highs. Broad-based US Dollar recovery combined with a cautious market mood is capping the further upside in the pair. Thin trading is likely to extend in the day ahead.

GBP/USD News

Gold ticks lower on modest US Dollar strength, downside seems limited

Gold price ticks lower on the first day of a new week and trades with a mild negative bias, just below the $1,955 level heading into the European session. A softer risk tone could lend support to the safe-haven XAU/USD and limit the downside.