– GBP dips as PCE inflation data looms, following BoE boost
– FOMC’s QE taper talk returns: Feddie Krueger risk is rising
– Charts says “allow for some near term” GBP “consolidation”
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- Spot: 1.4171
- Bank transfers (indicative guide): 1.3775-1.3874
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The Pound-to-Dollar exchange rate slipped from near recent multi-year highs on Friday and ahead of important inflation data from the U.S., which could bring terror anew to various markets if it or other prices data due out in the June month leads investors to invite ‘Feddie Krueger’s’ return to global bond street.
Pound Sterling was still close to the 1.42 handle against the Dollar ahead of the weekend but was trading a touch lower alongside GBP/EUR and GBP/JPY exchange rates as all eyes in the currency market reverted to North America where personal consumption expenditures data is due from the U.S. for the month of April.
The PCE price index is the preferred measure of inflation at the Federal Reserve (Fed) and inflation has been a hot topic of late right the way across all of the world’s financial markets, while investors have every reason to be mindful of upside risks to the consensus expectation for a 0.6% month-on-month increase.
“The budget would boost federal spending by 5% above the 2021 projected level, and spending will keep rising to reach USD8.2 trillion by end-2031. At the same time, federal debt will exceed the historical peak seen at the end of WW2 within just a few years,” says Michael Every, a global macro strategist at Rabobank.
Above: Pound Sterling quotes and performances over selected horizons. Source: Netdania Markets.
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It was in the April month that consumer price index inflation rose by 4.2% year-on-year and at its fastest pace since the aftermath of the financial crisis, which is why there are upside risks to Friday’s PCE figures although it’s also the case that expectations of further sharp rises are becoming increasingly widespread for the months and quarters ahead.
Rising inflation has prompted a tug of war between the world’s pre-eminent central bank and investors who’ve often been slow to receive its messages.
The Fed uses monetary policy levers including interest rates and quantitative easing bond purchases to manage inflation but has since June 2020 been seeking to generate more inflation than ever before and over a longer sustained period than before.
It says recent sharp increases in the official measure of inflation are likely to be “transitory” and that it will nonetheless continue with its new…
Read More: Pound-Dollar Rate Slips and USD Flips On Feddie Krueger’s Return