GBP/USD breaks above 1.2000 as US dollar drops further

The GBP/USD pair broke above 1.1990 during the American session and jumped to 1.2033, reaching the highest level since July 8. It is hovering around 1.2010/15, up 150 pips for the day, boosted by a weaker US dollar.

Generally speaking, there is a significant improvement in risk sentiment. Equity prices ended higher in Europe and the Dow Jones gains 0.54% on Monday. The latest round of US economic data and signs the Federal Reserve will hike rates by “just” 75 basis points contribute to improving market sentiment. Investors are also looking at the first corporate results for the second quarter.

In the UK, the political developments continue. The final candidates to become Prime Minister should be clear by Thursday. Besides politics, UK economic data will be key during the week. On Tuesday, labor market is due. Later during the week, CPI, PMI and retail sales will be released.

Bank of England’s next meeting is on August 4. A 50 basis points rate hike is priced in. BoE Saunders said on Monday that interest rates could top 2% in 2023 and emphasized the central bank must act to prevent high inflation.

In the US, there is a quiet week regarding economic data. The attention is set on the Federal Reserve meeting next week. Market participants see a 75 basis point. The odds of a larger increase softened on Friday.