Where we are: GBP/USD is trading at 1.3150, down 0.40% on the day. The pair has drifted lower through the European session, failing to recapture yesterday’s New York close. We’re seeing a clear bearish bias intraday, with immediate support seen at the 1.3120 level.
What’s driving it: The Bank of England’s hawkish hold stance remains the primary domestic driver, with two MPC members still voting for a hike. This is battling against sticky services inflation and a core CPI reading that ticked up to 2.6%. While the unemployment rate has eased, it’s stale data and not a current market mover. The broader USD strength, as evidenced by the DXY’s move higher, is also weighing on Sterling.
- The Bank of England’s 7-2 vote split for holding rates at 3.75% signals ongoing hawkish sentiment, with two members pushing for a hike to 4%.
- UK CPI remains stubbornly at 2.8% YoY, with core CPI ticking up to 2.6%, suggesting inflation pressures are not fully abating.
- CFTC positioning shows net non-commercial shorts at -71,585 contracts, a crowded short stance that leaves Sterling vulnerable to a squeeze on positive surprises.
NY session focus: With no major UK data prints scheduled before the New York open, attention will be squarely on US macro releases, particularly the 08:30 ET figures. Traders will be watching for any signs of cooling inflation or labour market weakness that could prompt a dovish shift in Fed expectations, potentially offering Sterling some relief. The key level to watch on the upside is 1.3180, the prior day’s New York close. The trade that’s working is short Cable into US data. The trade at risk is a sharp upside surprise in US inflation, which would likely extend Cable’s decline and test the 1.3100 handle.