The British pound climbs 0.31% ahead of US CPI data, with markets pricing Fed rate hikes and BoE tightening expectations.
The British pound strengthened 0.31% against the US dollar, trading at 1.3384, as the greenback retreated from earlier losses. Investors are focused on Wednesday’s US Consumer Price Index (CPI) release for May, with forecasts pointing to a 4.2% year-over-year increase, up from April’s 3.8%. Core CPI is expected to rise to 2.9% from 2.8%.
Markets are pricing in 23 basis points of Federal Reserve rate hikes by year-end, despite inflation exceeding the Fed’s 2% target. Meanwhile, private hiring data showed a dip, with the ADP Employment Change 4-week average falling to 29K from 37.5K, following last week’s strong Nonfarm Payrolls report of 172K new jobs.
Expectations of a Bank of England (BoE) rate hike, with markets pricing in at least 45 basis points of tightening, have also supported the pound. The US Dollar Index (DXY) remains under pressure as traders await the inflation data.