GBP/USD Bearish as Markets Price Larger BOE Tightening

The Pound Sterling's rate advantage over the Federal Reserve is no longer an issue, as markets price in a larger tightening path for Bank of England compared to the Fed.

GBP/USD holds just under 1.3550 after a Monday that saw a 42-pip move, and the pair's direction remains bearish as long as this level caps it.

The forward path reads the same way, with markets pricing in 71.9 basis points of Bank of England tightening over twelve months against 59.5 from the Federal Reserve.

The inflation data does not obviously support this ordering, but UK CPI inflation was 2.6% in June and is expected to rise further due to energy costs passing through.