GBP/USD: Room for a consolidation to develop in the short run below minor support at 1.2750/60.

Sterling is a moderate underperformer on the session as markets move to reduce exposure ahead of this week’s key UK event risk. Economists at Scotiabank analyze GBP outlook.

Resistance aligns at 1.2800/10

UK CPI data for May are released tomorrow (a firm MoM gain for the headline rate of inflation and little change in the core rate, which was 6.8% YoY in April are expected). This will tee up a BoE rate hike Thursday; a 25 bps hike is expected, with slightly more (28 bps) priced in to swaps.

Losses look corrective but the solid GBP gains last week leave some room for a consolidation to develop in the short run below minor support at 1.2750/60 – potentially towards support at 1.2700/25 intraday. Resistance is 1.2800/10.

EUR/USD stays in daily range below 1.0950

EUR/USD lost its recovery momentum near 1.0950 and retreated modestly during the European trading hours on Tuesday. The cautious market stance ahead of US housing data helps the US Dollar hold its ground and doesn’t allow the pair to stretch higher.

EUR/USD News

GBP/USD drops below 1.2800 amid risk aversion

GBP/USD came under renewed bearish pressure and declined below 1.2800 on Tuesday. The US Dollar benefits from souring market mood and weighs on the pair. Building Permits data from the US and Fedspeak will be watched closely by market participants ahead of key UK events.

GBP/USD News

Gold continues to fluctuate at around $1,950

Gold price continues to move up and down in a narrow range at around $1,950 on Tuesday. The benchmark 10-year US Treasury bond yield is down more than 1% on the day, allowing XAU/USD to keep its footing ahead of mid-tier data releases from the US.