COMMENT-What will it take for sterling to scale new peaks?

A soft-side miss on monthly core PCE inflation increased expectations of a Fed rate cut, weighing on U.S. Treasury yields and the dollar broadly, but it’s unlikely that this small deviation will lift GBP/USD to new trend or yearly highs.

Sterling reached a Friday session high of 1.2766 after the data.

Sterling gains are likely to remain capped by the May 28 high at 1.2801 and the 2024 year-to-date peak struck on March 8, as traders await further UK and U.S. data for clearer guidance on the paths of UK and U.S. inflation and central bank policy.

Overall, with UK and U.S. inflation expectations remaining less dovish in the near-term, the Fed and BoE are likely to maintain their current high-for-longer stance, which should anchor prices between the May 9 low at 1.2446 and the May 28 high 1.2801.

LSEG's IRPR suggests a slightly faster and deeper BoE policy path in 2024, which could cap GBP/USD at the March yearly high.

However, any significant shifts in U.S. or UK employment or inflation data would disrupt the current GBP/USD stability.

For more click on