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Pound softens near six-month high as traders await US PCE
GBP/USD trades below mid-1.3600s as investors watch US PCE inflation and a Jackson Hole speech for clues on the Fed, while the Treasury signals it may use its near $1 trillion General Account to fund longer-dated bond buybacks.
FXStreet reports the GBP/USD pair is edging lower on Wednesday, sitting with a negative bias below the mid-1.3600s during the Asian session and giving back part of the previous day's gains. Despite the pullback, spot prices remain close to a six-month top set last Friday, as traders wait for fresh momentum from the US Personal Consumption Expenditures, or PCE, Price Index.
The focus is on US inflation data, along with scrutiny of Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday, for signals about the US central bank's rate path. DBS Bank strategist Philip Wee said Warsh needs to clarify how a Fed without forward guidance plans to anchor expectations, how much tightening it is prepared to tolerate through long-term yields, and the policy boundary between the Fed and the Treasury.
FXStreet adds that expectations have shifted toward a policy hold at the September 15 to 16 FOMC meeting after softer inflation readings and a sluggish labor market. It also points to potential support for GBP/USD from easing inflation fears as crude oil prices have fallen, alongside the Treasury's buyback plans, where two senior officials indicated it could tap its near $1 trillion General Account to finance increased buybacks of longer-term bonds.
On the geopolitical side, developments around the Middle East are also in play, with Iran restarting talks with Oman to manage shipping through the Strait of Hormuz and crude prices slipping to a nearly two-week trough. FXStreet notes that US offers of sanctions relief and an end to the naval blockade in exchange for reopening the strait and stopping regional proxy attacks have revived hopes for a diplomatic resolution, which it says could weigh on the USD's reserve status.
Latest closeWTI crude $82.40 ▲1.4%|GBP/USD 1.354 ▲0.3%