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Pound jumps as weaker UK inflation data helps steer a dollar selloff
Cable (GBP/USD) rallied more than 1% in one of its strongest sessions of the year after U.S. PPI showed broad and core inflation cooling.
The British pound gained sharply versus the U.S. dollar, with Cable trading near 1.3540 and up more than 1% on the day, after briefly testing 1.3558 and moving above key technical levels including the 200-day exponential moving average and the 1.3400 area, according to FXStreet.
FXStreet said the move followed a repricing of the entire Dollar complex after June Producer Price Index data landed with a headline monthly decline of 0.3% versus expectations for a flat reading. The annual rate slowed to 5.5% from 6%, and the core measure fell short as well, printing 4.7% year over year versus 5.2% expected.
With factory-gate inflation cooling, the outlet reported that markets reduced the urgency of further Federal Reserve tightening, with pricing for a Fed hike by September near 70% before the data but the conversation later blunted. It also noted that Fed Chair testimony scored neutral rather than hawkish, while a hawkish-scored speech and the Beige Book trimmed the move late but did not reverse it.
FXStreet added that sterling strength also reflected relative expectations for the Bank of England, where a September hike is fully priced and a second increase this year is nearly so. It pointed to 10-year gilt yields hovering near 5% as war-driven energy costs continue to feed into the inflation outlook.