GBP/USD Re-Establishes Its Weekly High At 1.2450 Despite The Fed's Conflicting Views.

GBP/USD has established a new weekly high at 1.2450 as Fed policymakers disagree on interest rate guidance. As attention shifts to US Employment, the US Dollar Index (DXY) displays some resilience after falling significantly to around 104.13. In April, headline inflation in the United Kingdom slowed to 8.7%, ultimately leaving double-digit territory, but remained well above expectations.

During the Asian session, the GBP/USD pair faces stiff resistance near 1.2450. The Cable has reached a new weekly high of 1.2450, but further recovery is hampered by a lack of consensus among Federal Reserve (Fed) policymakers regarding interest rate guidance for June's monetary policy meeting.

S&P500 futures have increased their gains in early Tokyo trading on expectations that the US debt-ceiling proposal will pass Congress. Investors have begun contemplating the Federal Reserve's (Fed's) June monetary policy meeting, which is expected to result in an additional interest rate increase.

Fed policymakers' contradictory views on interest rate guidance are wreaking havoc on the financial markets. In an interview with the Financial Times, the president of the Cleveland Fed Bank, Loretta Mester, stated, “I don't see a compelling reason to pause — that is, wait until you have more evidence before making a decision.” While Fed Governor Philip Jefferson stated in a speech on Wednesday that pausing rate hikes at the upcoming FOMC meeting would provide opportunity to analyze additional data prior to determining the extent of additional monetary tightening, he did not elaborate. He added that a halt does not indicate that interest rates have peaked.

After falling abruptly to near 104.13, the US Dollar Index (DXY) is exhibiting some strength. It appears that investors are refocusing their attention on U.S. employment data. According to estimates, the US economy added 170K new workers to the labor market, which is less than the previous addition of 296K.

On the front of the British Pound, persistent inflation strengthens the case for another interest rate hike by the Bank of England (BoE). Due to higher food inflation and labor shortages, inflationary pressures in the UK economy are not abating as predicted. In April, headline inflation in the United Kingdom slowed to 8.7%, ultimately leaving double-digit territory, but remained well above expectations.

Following the latest inflation report, Nomura economists expect the Bank of England to raise interest rates by 25 basis points at each of the next three meetings. They added, “We therefore anticipate peak rates for the BoE to be 5.25 percent.”