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US on course to pull off 'soft landing' scenario

Huge market volatility seen in the last 48-hours after key data releases..



Sterling v US Dollar has seen its position improve by over 1% since yesterday after already claiming 1% on the week. Reaching a fresh high this morning (highest level since April 2022) the pair represents a very favourable level for either booking spot or forward. 

The move comes after a steeper than expected slowdown in US inflation rates which means the pressure is finally off the Fed to keep raising interest rates. A result of 3% undershot both the consensus for 3.1% and May's 4% numbers. But the better and more significant news comes from the core inflation rate which came in at 4.8% versus the 5% expected and 5.3% the previous month.

Not only does it mean that the Fed can leave interest rates alone after this month and perhaps start to lower them by year-end. But more importantly, it will likely mean the US will avoid a recession altogether, something no analyst or economist had expected to see at the start of the year. 

The US Dollar and US yields were both victims of the news with stock markets going into overdrive. The S&P 500 stormed to its best level in 15-months (£-$ a close follower of the market) and gold shot up to within 6% of its record high. Do you now stick, twist or hedge on this pair?

Elsewhere, GBP v EUR has seen nearly 1-cent movements each day this week with 1.1650-1.1750 mid-market levels being the resistance points. Today, the UK's GDP release for May saw the economy outperforming forecasts but confirmed growth has stalled in the quarter. A reading of -0.1% was better than forecast but it leaves the quarter sitting at just a 0.1% growth rate.