Where we are: Sterling is consolidating near the 1.3410 level ahead of the New York open, finding solid support after an active London morning session. Cable dipped to an intraday low of 1.3385 before stabilizing, remaining marginally lower relative to yesterday’s North American close. Key technical resistance sits at 1.3450, while a sustained break below 1.3380 opens up a deeper correction toward the 1.3320 zone. The pair continues to trade within a well-defined weekly range, well-insulated by strong physical demand near the figure.
What’s driving it: UK consumer price inflation unexpectedly held steady at 2.8% in May, defying consensus forecasts of a rise to 3.0% and signaling that the economic shock of the Iran conflict is transmitting more softly than feared. While this print alleviates immediate pressure on the Bank of England to tighten further, a core inflation tick to 2.6% and resilient services prices keep the MPC’s cautious 8-1 majority locked into a data-dependent holding pattern at 4.50%. This domestic monetary resilience, amplified by a softer DXY printing at 119.51 and US 2-year yields softening to 4.07%, keeps Sterling structurally supported on dips.
- UK CPI Surprise: Headline inflation held at a 13-month low of 2.8% y/y, as slowing food prices offset rising transport costs, lowering the immediate urgency for any hawkish BoE policy adjustment.
- MPC Policy Anchor: The Bank of England remains cautious with a 4.50% Bank Rate and an 8-1 vote split, indicating that services inflation must convincingly break lower before the committee pivots dovish.
- Crowded Short Positioning: CFTC speculator positioning shows a crowded short stance at -64,213 contracts, placing speculative shorts in the 17th percentile of their 52-week range and creating massive short-squeeze risk.
NY session focus: The New York session shifts focus to the heavy-hitting US calendar, starting with Retail Sales at 08:30 ET and President Trump’s speech at 09:30 ET, before the main event: the FOMC policy decision and economic projections at 14:00 ET. If US retail data prints soft or the Fed signals a dovish lean at 14:30 ET, the current path of least resistance favors a test of the 1.3450 and 1.3480 resistance levels. Selling Cable down here is highly risky given the positioning backdrop, while scaling into longs on dips to 1.3380 remains the preferred tactical play. The pain trade is a violent short-squeeze above 1.3500 that forces fast money to cover.