GBP/USD, EUR/GBP flows: Wait for FOMC continues, UK CPI undershoots
FX still largely treading water into FOMC
Slight GBP dip on lower than expected CPI, but plays to more positive mood
FX market still taking a breather in waiting mode for the FOMC later, while oil consolidates its break lower and risk markets generally positive (KOSPI another +1.5% overnight to be closing back in on the highs, even with the choppier recent Nasdaq price action).
UK CPI in the meantime comes in on the low side of expectations, sticking at 2.8% (mkt 3%), with core 2.6% from 2.5% (mkt 2.7%).
That helps further reinforce the view that the BoE can keep policy on hold through the summer and on our view through the year.
EUR/GBP sees a 10 tick pop higher and continues it slow lift off the 20226 YTD range floor but the recent price action overall has been constructive for sterling as the market defensiveness over political risk has ebbed, even into the by-election, and geopolitics have improved.