GBP/USD jumps above 1.2600 as Pound accelerates to the upside
- Pound extends gains across the board, US Dollar shows weakness.
- Key events ahead: Another vote at the Conservative race and FOMC meeting.
The GBP/USD pair rose further during the American session and speed up above 1.2600. Cable climbed to 1.2634 reaching the highest level since Friday. From yesterday’s low it has risen 125 pips and as of writing, it is holding near the top, with a strong bullish tone.
The move to the upside took place amid a modest decline of the US Dollar but also on the back of a rally of the Pound. The greenback is falling modestly ahead of the FOMC statement. The Federal Reserve is expected to leave the Fed Funds rate unchanged. Analysts will look for clues about when it could lower rates as markets appears to be anticipating. After the statement (18:00 GMT), Jerome Powell will deliver a press conference (18:30 GMT).
Regarding the Tory leadership contest, another vote is taking place. It was reported that Rory Stewart was in discussions with Michael Gove to potentially unite so one of them could reach the final stage. The political drama and the uncertainty around Brexit continue to be the key driver of the Pound.
Data released today showed inflation in May reached 3% (y/y) in the UK, slightly above expectations, having no significant influence on the Pound. On Thursday, the Bank of England will announce its decision on monetary policy. No chance in rates is expected, neither surprises from the statement. “Our base case suggests a muted reaction in sterling overall. Directional risks in GBP remain more a function of the UK's political backdrop and global risk environment”, wrote TDS analysts.
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