GBP/USD: 1.30 may not be an insurmountable obstacle if BoE raises guidance – SocGen

A pulsating week lies ahead for the Pound. Economists at Société Générale analyze GBP outlook.

Sterling technically stretched

Technically, the Pound is stretched after the impressive gains of last week but 1.30 may not be an insurmountable obstacle if the BoE flags additional tightening this summer and risk sentiment does not falter. This means bank rate could leapfrog the fed funds rate in the US. 

Selling of EUR/GBP also remains popular as 2y Gilt yields cross 5% for the first time since July 2008. This inflates the spread over German yields to 185 bps. 

Crucially, CPI for May will be published on Wednesday, one day before the BoE rate decision. We forecast +25 bps this week and +25 bps to 5.0% in August.