Where we are: GBP/USD is trading at 1.3185, up 0.16% on the session. The pair has seen a modest upward drift through the European session, building on overnight gains and now sitting just above the prior New York close. We’re trading within the overnight range, but the momentum is clearly to the upside as we await the US data deluge.
What’s driving it: The Bank of England’s hawkish hold stance continues to underpin Sterling. The 7-2 vote split, with two members advocating for a hike, signals persistent inflation concerns, particularly around services and pay. This domestic hawkish bias is the primary driver, with cross-currency dynamics acting as a secondary influence. The DXY is largely flat at 101.62, and US yields are showing a slight softening, particularly at the long end, which provides a tailwind but isn’t the primary catalyst for Cable’s current strength.
- Bank of England’s 7-2 vote split on rates, with two members voting for a hike, highlights ongoing inflation concerns.
- UK CPI remains sticky at 2.8%, with core CPI ticking up to 2.6%, reinforcing the hawkish tilt.
- Net non-commercial short positioning in GBP futures stands at -71,585 contracts, indicating significant room for a short-covering squeeze on positive surprises.
NY session focus: All eyes are on the 08:30 ET US data releases, particularly the Core PCE Price Index and Final GDP q/q. A hotter-than-expected PCE print would likely see USD strength spill over, potentially pressuring GBP/USD back towards 1.3150. Conversely, softer US inflation or a weaker GDP could allow Cable to push higher, targeting 1.3200 and beyond. The risk here is a strong US inflation print that forces a reassessment of the BoE’s hawkish stance against a more hawkish Fed outlook. The pain trade is a sharp reversal lower on US data, catching shorts off guard.