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The GBP/USD pair has rallied after the US Producer Price Index (PPI) for June surged below estimates, indicating a steady deceleration of inflation in the largest world economy. The pair is trading at 1.3133 at the time of writing.
The UK is seen as hardly missing a recession, but fears reignited as the Bank of England is expected to tighten monetary conditions.
On the US front, the BLS revealed that prices paid by producers (PPI) rose below estimates, suggesting the deflation process is gathering pace. Core PPI showed signs of losing steam and expanded at a 2.4% YoY pace, below estimates of 2.6% and the previous month’s 2.8%.
Initial Jobless Claims for the week ending July 5 climbed less than estimates, standing at 237K. Despite the tight labor market, investors ignored it, as the Fed’s primary focus remained on inflation.
The Bank of England is expected to raise rates by 25 bps at the upcoming July meeting, but bets for the rest of the year are paired at 21%.
The UK economy dodged a recession, with GDP growth for the last three months at 0%. Concerns of a recession loom as the Bank of England tightens monetary policy to curb high inflation at 8.6% levels.
