GBP/USD: Room for a consolidation to develop in the short run below minor support at 1.2750/60 – Scotiabank

Sterling is a moderate underperformer on the session as markets move to reduce exposure ahead of this week’s key UK event risk. Economists at Scotiabank analyze GBP outlook.

Resistance aligns at 1.2800/10

UK CPI data for May are released tomorrow (a firm MoM gain for the headline rate of inflation and little change in the core rate, which was 6.8% YoY in April are expected). This will tee up a BoE rate hike Thursday; a 25 bps hike is expected, with slightly more (28 bps) priced in to swaps.

Losses look corrective but the solid GBP gains last week leave some room for a consolidation to develop in the short run below minor support at 1.2750/60 – potentially towards support at 1.2700/25 intraday. 

Resistance is 1.2800/10.