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British pound edges higher near 1.3500 as GDP week begins
GBP is supported early versus the US dollar, but traders are leaning toward the Bank of England holding rates, with UK Q2 GDP due on Thursday.
The British pound was higher against major currency peers at the start of the UK Q2 GDP data week, trading around 1.3500 versus the US dollar in European hours on Monday, according to FXStreet.
FXStreet said the early outperformance appears unlikely to persist, as traders expect the Bank of England will not hike interest rates in the near term, even with oil prices feeding into global inflation expectations. It also cited Rabobank commentary that GBP net shorts bounced higher ahead of the BoE policy meeting.
The outlet noted that this backdrop is likely to limit near term support for sterling, despite a more hawkish voting split than markets had expected, while Governor Bailey’s messaging was described as cautious. The key trigger this week for the pound is the preliminary UK Q2 GDP report due on Thursday, with the Office for National Statistics expected to show growth of 0.4% versus 0.6% previously, and a monthly decline of 0.1% in June after a 0.6% rise in May.
FXStreet also pointed to a slightly firmer dollar, with the US Dollar Index near 99.60 after a weak Friday, while expectations are for dollar weakness ahead because markets no longer see the Federal Reserve hiking at its September meeting. The article added that BNY strategists linked the shift in Fed expectations to a weak US labor market reading.
Latest closeDollar index 99.98 ▲0.3%