لا تُقدم XM خدماتها لمواطني الولايات المتحدة الأمريكية.

Has the pound rally run its course?

  • Pound gains as BoE seen cutting rates late

  • Economy improves but inflation may further slow

  • A Labor victory could make the BoE’s job easier

  • As rate cuts come forward, pound may weaken

Sticky core inflation weighs on rate cut bets

We are nearly halfway through 2024 and the pound is holding the first place among the major currencies in terms of year-to-date performance.

This is because up until recently the BoE was seen as the major central bank that could be forced to press the rate cut button last, and fewer times than others. However, the dovish stance of the BoE at its latest gathering prompted investors to reconsider their view and even assign a decent chance for a first quarter-point cut in June, at a time when the stickiness in US inflation and the Fed’s ‘higher for longer’ mantra pushed the timing of the first expected rate cut by the Fed beyond September.

That didn’t last for long though as the hotter-than-anticipated UK inflation data for April, and especially the stickiness in underlying price pressures, prompted investors to scale back again their BoE rate cut bets. Currently, they are pricing in around 30bps worth of reductions by December, with the probability of a 25bps cut rising above 50% only in September.

PMIs point to further cooling in price pressures

What may have also helped market participants to keep the BoE implied path higher than some other central banks, and thereby the pound supported, was the improvement in economic activity. After slipping into recession during the second half of 2023, the UK economy rebounded by 0.6% in Q1, with the UK PMIs suggesting that the recovery likely continues at a decent pace in Q2.

However, the PMIs also revealed that prices charged inflation fell to its lowest level since February 2021 in May, which suggests that the upcoming CPI numbers, due out on June 19, could reveal further softening in inflation. This may encourage participants to bring forth their rate cuts again, and thereby hurt the pound.

Just the day after the data, the BoE gathers to decide on monetary policy and investors will be eager to see whether they will get signs for an earlier rate cut, especially if the CPIs indeed reveal a further slowdown.

Pound awaits elections as well

Nonetheless, with the general elections scheduled just two weeks after the decision, the Bank is unlikely to rock the boat. Policymakers may prefer to wait for the outcome of the election, as the two opposing sides hold different views on fiscal policy. For example, the Conservatives are advocating lower taxes, while the Labor party has been portraying itself as the party of fiscal responsibility.

Therefore, a Labor victory, as the opinion polls are currently suggesting, could make the BoE’s work easier, allowing it to cut interest rates much earlier than currently expected. According to remarks by the Chief Business Economist at S&P Global Market Intelligence, the latest PMI readings support the view that the BoE will start cutting interest rates in August if upcoming data continues to move in the right direction.

Is sterling running out of fuel?

Ergo, combining all the above, the pound’s rally may be at its final stages. The British currency may eventually come under selling pressure, especially against the aussie, as the RBA is not expected to press the cut button this year. On the contrary, due to the stickiness in Australian inflation, the market is assigning an around 20% chance for a quarter-point rate hike by September.

From a technical standpoint, pound/aussie has been in a recovery mode after testing the key zone of 1.8900. However, the pair continues to trade below the short-term downtrend line drawn from the high of March 5, which means that there is a decent chance for the bears to take charge again soon and push the action back down to 1.8900.

If they do so and manage to overcome that hurdle, they may dive all the way down to the low of December 27 at around 1.8600. For the outlook to turn bullish again, traders may need to lift the price above the 1.9515 barrier, which acted as a temporary ceiling between February 13 and March 20.

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إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.

جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.

أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.

تحذير المخاطر: رأس مالك في خطر. المنتجات التي تستخدم الرافعة قد لا تكون مناسبة للجميع. يرجى الاطلاع على تنبيه المخاطر.