GBPUSD remains up 0.2 % at the start of the North American session. The Federal Reserve’s hawkish commentary continued despite good market sentiment. , UK retail sales beat forecasts, a headwind for the British pound. , traders track current US housing and Fed talks. The British pound (GBP) is trending north of 1.1880 on risk-on momentum, seen as a rally in US equity futures without fundamentals after several Federal Reserve (Fed) officials signaled further interest rate hikes. At the time of writing, GBPUSD is trading at 1.1882, 0.35% above the open, taking advantage of broad US dollar (USD) weakness. Sentiment turned positive as North American traders awaited US economic data on existing home sales. As the last two US inflation reports, namely the Consumer Price Index (CPI) and the Producer Price Index (PPI), led to an improvement in market sentiment, Fed policymakers resisted a possible Fed reversal. St. Louis Fed President James Bullard said that interest rates are not „restrictive enough”, adding that if the federal funds rate (FFR) falls to a range of 5 percent to 5.25 percent. Echoing his comments, Minnesota Federal Reserve President Neil Kashkari says the one-month data won’t reassure the Fed too much because it will have to wait until they’re sure inflation has stopped. On Friday, Boston Federal Reserve President Susan Collins said the Fed should continue to raise interest rates, adding that rates will have to remain high for some time. At the beginning of the European session, the United Kingdom (UK) calendar showed that retail sales unexpectedly beat forecasts, even as the Bank of England (BoE) admitted that the UK economy is in recession. October retail sales rose 0.6% MoM compared to the forecast of 0.3%, while excluding volatility rose 0.3% MoM, below the forecast of 0.6%. At the annual pace, both readings declined less than expected, but remained negative. Meanwhile, traders are still pricing in -decade high inflation in the UK. The Consumer Price Index (CPI) rose 11.1% year-on-year in October, beating the Bank of England’s forecast that inflation would peak around 10.9%. As indicated by the STIRs, money market futures estimate an 82% probability that the BoE will raise 50 basis points to 3..50%. In addition, British Chancellor of the Exchequer Jeremy Hunt announced a £55 billion budget plagued by tax increases and spending cuts. The budget is split between £30bn of spending cuts and £25bn of tax rises. However, most of the spending cuts will be made after the next election in January 2025.

James Rogers

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