GBP/USD poised for six-month weekly rise, boosted by UK data, BoE tightening expectations

• GBP/USD trades with significant gains as UK economic data supports expectations of further BoE tightening.
• US data moderation softens the USD tone, providing an additional boost to GBP/USD.
• Hawkish remarks from Fed policymakers suggest further tightening may be needed.
• Upcoming events include the UK’s May inflation data release, the BoE decision, US Fed speakers, housing data, and S&P Global PMIs.

GBP/USD trades with solid gains on Friday, set to finish its weekly rise in six months after UK economic data supported additional Bank of England (BoE) tightening. The US Federal Reserve (Fed) keeping rates unchanged was a headwind for the US Dollar (USD). Hence, the GBP/USD is trading at 1.2833, up 0.40%, after hitting a low of 1.2768.

US Fed decision and hawkish remarks from policymakers in focus, upcoming UK inflation data and BoE decision awaited

Several factors benefitted the Pound Sterling (GBP) during the. Firstly, market sentiment remains upbeat, with most global equities trading with gains. That, alongside robust employment data in the UK, spurred a reaction in the bond market, with most investors expecting at least 125 bps of additional tightening by the BoE, which current Bank Rate sits at 4.50%.

Additionally, data from the United States (US) warranting a moderation in the pace of tightening softened the US Dollar trading tone as CPI and PPI figures slowed. That, alongside Fed’s decision not to increase rates in June to further assess upcoming data so they do not overshoot in monetary policy, gave another leg-up to the GBP/USD pair.

In the meantime, after Wall Street opened, Consumer Sentiment for June in the US improved, as the University of Michigan (UoM) revealed. Figures came at 68.0 vs. May’s Final 64.9, while inflation expectations for one year were downward revised from May 4.2%, while June data came at 3.3%.

Consequently, the GBP/USD capped its uptrend as US Treasury bond yields resumed to the upside, underpinning the greenback. The US 10-year Treasury bond yield rises five basis points up to 3.773%, while the US Dollar Index (DXY) edges up 0.13%, at 102.277.

Recently, Federal Reserve policymakers crossed wires with a hawkish stance after the latest Fed decision. Richmond Fed President Thomas Barkin said that he’s “comfortable doing more” if inflation does note recedes. Later, Fed Governor Christopher Waller added that slow progress on inflation “will probably require some more tightening.”

Upcoming events

The UK economic docket will feature May’s inflation data release ahead of the Bank of England decision on Thursday. On the US front, Fed speakers would be grabbing most headlines, alongside the release of housing data and S&P Global PMIs.

GBP/USD Technical Levels