GBPUSD:
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The pound maintains support from the UK's inflationary backdrop, but fails to regain ground against the strengthening US dollar. Rising inflation expectations among British consumers reduce the likelihood of imminent easing by the Bank of England, while simultaneously highlighting the risk that high prices will continue to weigh on domestic demand and economic activity.
Earlier expectations of a rate hike by the Bank of England helped GBPUSD rise to multi-month highs, so a significant portion of this factor has already been priced in by the market. Attention has now shifted to the relative hawkishness of the two central banks. Following signals from the Federal Reserve indicating its readiness to continue fighting inflation, US bond yields have risen, and the probability of a September rate increase has noticeably increased.
Within the current session, the dollar's momentum appears stronger than local arguments supporting the pound. The British currency may receive support from persistent inflation, but renewed growth will require new data reinforcing expectations of Bank of England action. Until such confirmation appears, rate hikes in the US and cautious demand for safe-haven assets create conditions for further GBPUSD decline.
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