GBP/USD rises to 12-month high on Friday as markets pile into rate cut hopes

• 
  GBP/USD
  approaches
  1.3900
  for
  the
  first
  time
  in
  a
  year.
• 
  US
  PPI
  producer-level
  inflation
  rose
  faster
  than
  expected
  in
  June.
• 
  Despite
  inflation
  risks,
  markets
  have
  pinned
  hopes
  on
  a
  September
  rate
  cut.

GBP/USD
wrapped
up
Friday
on
the
high
side
of
a
two-week
rally
as
the
US
Dollar
broadly
buckles
under
the
weight
of
investors
dog-piling
into
hopes
of
getting
a
rate
cut
from
the

Federal
Reserve
(Fed)
in
September.
Markets
are
shrugging
off
an
unexpected
uptick
in
Producer
Price
Index
(PPI)
wholesale
inflation,
which
accelerated
faster
than
expected
in
June
and
could
put
pressure
on
key
Fed
inflation
metrics
looking
forward.

Forecasting
the
Coming
Week:

Fed
rate
cut
bets
and
the
ECB
should
rule
the
sentiment

In
June,
the
core
Producer
Price
Index
(PPI)
for
wholesale
inflation
in
the
US
accelerated
to
3.0%
year-over-year,
exceeding
the
expected
2.5%.
Additionally,
the
previous
period’s
figure
was
revised
upward
to
2.6%
from
the
initial
2.3%.
Despite
the
significant
increase
in
producer-level
inflation,
the
market’s
attention
has
turned
to
the
decrease
in
Consumer
Price
Index
(CPI)
inflation
earlier
in
the
week,
leading
to
heightened
expectations
of
a
rate
cut.

According
to
the
CME’s
FedWatch
tool,
there
is
a
significant
probability
of
a
quarter-point
rate
cut
at
the
Federal
Open
Market
Committee’s
(FOMC)
meeting
on
September
18.
Rate
traders
are
also
currently
pricing
in
at
least
three
rate
cuts
in
total
for
2024,
which
is
more
than
the
one
or
two
cuts
projected
by
the
Fed
by
December.

In
other

US
economic
data
released
on
Friday,
the
University
of
Michigan’s
Consumer
Sentiment
Index
survey
dropped
to
a
seven-month
low
of
66.0,
falling
short
of
the
expected
increase
to
68.5.
This
reflects
increasing
discouragement
among
US
consumers
about
the
economic

outlook.
Additionally,
the
University
of
Michigan’s
5-year
Consumer
Inflation
Expectations
decreased
slightly
in
July
to
2.9%
from
the
previous
3.0%.
It’s
worth
noting
that
long-term
consumer
inflation
expectations
remain
significantly
higher
than
the
Fed’s
target
annual
inflation
rate
of
2.0%.

Coming
up
next
week,
the

Sterling
will
face
down
the
UK’s
own
Consumer
Price
Index
(CPI)
inflation
release,
slated
for
next
Wednesday.
UK
labor
data
and
Retail
Sales
will
follow
up
in
the
back
half
of
the
week,
and
on
the
Greenback
side,
US
Retail
Sales
will
drop
earlier
in
the
week
on
Tuesday.

GBP/USD
technical
outlook

Cable
rallied
back
into
12-month
highs
on
Friday,
extending
into
a
second
straight
week
of
firm
gains
and
inching
back
toward
the
1.3000
handle.
GBP/USD
has
risen
nearly
3%
in
July,
climbing
from
the
month’s
early
swing
low
to
1.2615.

GBP/USD
has
closed
in
the
green
for
all
but
two
of
the
last
twelve
consecutive
trading
days
as
the
pair
vaults
upwards
from
the
200-day
Exponential
Moving
Average
(EMA)
at
1.2620.
Bulls
will
be
looking
to
drag
bids
into
2023’s
peak
of
1.3142,
while
bearish
pressure
will
be
looking
to
drag
price
action
back
to
the
50-day
EMA
at
1.2715.

GBP/USD
hourly
chart

GBP/USD
daily
chart