Sterling Steady Near 1.35 as UK Inflation Day Approaches
GBP/USD is holding around 1.3526 this morning, calm on the surface, but the options market is pricing a busy couple of days. UK inflation data lands tomorrow, and for a currency that has rallied more than 6% since January, the bar for disappointment is low.
Why the pound is vulnerable here
Don’t get me wrong — the sterling story has been genuinely good. The Bank of England has kept its inflation credentials intact while other central banks have wavered, and the carry argument for holding pounds has been compelling. But good stories get priced in. At 1.35+, the pound is no longer cheap on any short-term valuation model I trust, which means the marginal buyer needs a reason.
Tomorrow’s CPI print is that reason. A hot number and the path to 1.37 opens quickly. A soft one, and the 1.33 handle — tested briefly in early May — comes back into play.
Around the majors
EUR/USD is parked near 1.1716, going nowhere in a hurry, while USD/JPY has drifted up to 157.85 from the week’s lows. The yen remains the market’s favorite funding currency, and until Japanese data forces a repricing of Bank of Japan expectations, selling yen rallies remains the path of least resistance.
My bias: respect the sterling rally, but don’t add to it the day before a data print. That’s how good trades turn into bad stories.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
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