BUZZ-COMMENT-Sterling down but not out as UK inflation, growth hint at further gains
GBP/USD is down Friday, but remains resilient, as recent price action and economic data have weakened dovish BoE rate expectations. This keeps sterling on track for its November 2024 highs above 1.30, assuming steady inflation and growth in the U.S. and UK remain constant.
The pound reached a new 2025 high at 1.2479 overnight, the 5th in six sessions, before pulling back after a spate of soft-to-mixed euro zone flash PMIs sent global yields lower, and lifted the dollar.
Post-Brexit, the UK is less tied to Europe, and GBP/USD should stay relatively strong against both the euro and USD, as the BoE focuses on combating persistent inflation. Recent data hints at stronger UK economic activity, reducing the likelihood of deeper and faster rate cuts.
The outlook for sterling bulls is positive, however, potential risks remain. Though markets have become somewhat inured to President Donald Trump's tariff yammering, if his tariff rhetoric turns into action, it could raise U.S. inflation expectations and rates, limiting further sterling gains.
A commensurate rise in UK yields may revive UK fiscal concerns which may impede growth and weigh on Sterling.
Currently, sterling is riding the upper 30-day Bolli higher, eying the 200-DMA at 1.2788. Barring a change in U.S. or UK rates, or trade expectations, the path to 1.30 may be clearing.
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