Where we are: GBP/USD is trading at 1.3456, marginally lower on the day (-0.01%). Cable has traded in a tight 1.3446-1.3476 range so far today. This level is just below Friday’s close. Resistance is likely to be found at the intraday high and then psychological resistance at 1.35.
What’s driving it: Sterling is struggling to find direction as the market digests recent UK data. The Bank of England’s cautious stance, underscored by the 8-1 vote to hold rates at 4.50% last month, continues to restrain the Pound. While April’s CPI data showed a welcome decline, services CPI remains stubbornly high, keeping the MPC on edge. The slight widening of the US-UK 10Y yield spread to -38bp isn’t helping sentiment either, although the rise in FTSE 100 may provide the floor.
- BoE Governor Bailey’s interview transcript will be parsed for any shifts in the central bank’s outlook.
- UK unemployment ticking up to 5.0% in February is a potential warning sign that could sway the MPC to a more dovish stance if it continues.
- Crowded short GBP positions – net non-commercials at -61,398 contracts – suggest that any positive surprise could trigger a squeeze.
NY session focus: The main focus for the New York session will be the 10:00 ET ISM Manufacturing PMI release. A strong print above 53.3 could fuel further USD strength and weigh on Cable, while a miss could provide Sterling with a much-needed boost. We’ll also hear from FOMC Member Powell at 20:30 ET — any hawkish rhetoric would further pressure GBP/USD. Key levels to watch are 1.3440 for support and 1.3476 for resistance. The trade is to fade this rally and look for 1.3440, and the risk is to short the rally.