UK Market Commentary – Thursday, May 23

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 USD Rally Stunts GBPUSD RiseThe rally in GBPUSD has stalled into the back end of the week amidst an uptick in USD on hawkish Fed commentary and weaker-than-forecast UK data.  On the Dollar front, hawkish commentary from Fed members over the week has seen USD regaining most of the ground lost last week in response to softer US inflation. Several Fed members this week have urged the Fed to hold rates steady for longer in order to drive inflation lower. The FOMC minutes yesterday reaffirmed this view with some members even citing support for further tightening if inflation doesn’t start to fall soon.
 UK Services PMI SlumpsIn the UK, the April services PMI released today came in well below forecasts at 52.9, below 54.7 expected and down from 55 prior. The data comes on the back of a fresh drop in UK inflation earlier in the week which saw headline inflation falling back to 2.3%. Traders are now torn over whether the BOE is likely to cut rates next month or wait for a further push lower in inflation before easing later in the summer. Incoming UK data will now be closely watched. Looking ahead today, focus will be on the US PMIs due this afternoon with risks of a further push higher in USD if any strength is seen.
 Technical ViewsGBPUSD The rally in GBPUSD has seen price breaking out above the 1.2616 level. However, the move has stalled for now ahead of the 1.2832 level and the bear trend line. This remains the key hurdle for bulls to break. To the downside, below 1.2612, 1.2437 will be the key support to note. More By This Author:Gold Market Commentary
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