GBP managed to hold onto some of the gains following the CPI report, but there seemed to be a lack of momentum perhaps caused by speculation over the course of the day that a snap election was going to be held on the 4th July. At the top end of the day we saw GBPEUR attempt the highs of 2024, and GBPUSD hit fresh two-month highs. Trading around USD was a bit more positive following a hawkish Fed minutes.
*Daily move - against G10 rates at 7:30am, 23.05.24
** Indicative rates - interbank rates at 7:30am, 23.05.24
On the data front, focus falls back on the state of each respective economy with the release of PMI numbers for the month of May. Also we have the release of Q1 wage growth from Europe, which will have an implication on how markets forecast future rate hike/cut projections to be conducted by the ECB over the course of the year. Of course, the big question on most client’s lips will be the impact of the general election on GBP. So far very little impact in markets, as focus in the FX space remains on interest rate policies by central banks. Labour is currently expected to win, according to polls, but should there be a possibility of a hung-parliament then we could see some increased volatility on GBP. But for now, GBP is supported on the basis that markets are pricing in less rate cuts expected this year.
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