What’s next as the British pound hits its highest in more than three years?

Forex

Summary:

The British pound hit a 3-year high near $1.36, driven mainly by dollar weakness. Analysts are split: some expect further gains, others see limited upside amid UK rate cut risks and slowing growth.

The British pound is hovering at its highest level in more than three years — and analysts are divided on the potential for further upside.

Britain’s currency was last seen trading around the $1.36 mark on Wednesday morning in London.

It marked a slight drop from Tuesday, when sterling hit its highest level since January 2022.

So far this year, the pound has surged 8.7% against the greenback.

Against the euro , however, sterling is down 2.9% year-to-date. It was last seen trading marginally higher against the euro zone currency, with one pound buying around 1.173 euros.

Dollar weakness

According to Janet Mui, head of market analysis at RBC Brewin Dolphin, much of the pound’s upward trajectory is actually more to do with underlying dollar weakness than faith in sterling itself.

“The relative strength of the pound has been more of a weak U.S. dollar story this year,” she told CNBC by email on Wednesday.

U.S. President Donald Trump’s unpredictable trade policies shook confidence in American assets earlier this year, which in turn has sparked concerns in markets about de-dollarization.

Paul Jackson, global head of asset allocation research at Invesco, said sterling was on a recovery journey from the “extreme low” seen in the aftermath of former British Prime Minister Liz Truss’s so-called mini budget, which sparked a severe sell off of the pound and U.K. government bonds in 2022.

He agreed, however, that much of the movement this year was attributable to dollar weakness, pointing out sterling’s simultaneous depreciation against the euro.

Will sterling go higher?

“I would expect that pattern to continue in the future, with the dollar weakening along with the US economy (and investor doubts about US fiscal and tariff policies), while the euro could strengthen on optimism about the implications of the coming fiscal boost (especially in Germany),” Invesco’s Jackson said.

He argued that the ECB had likely completed most of its monetary easing for the current cycle, whereas the Bank of England and the Federal Reserve “have a lot of catching up to do.”

“In 12 months, I would expect GBPUSD to be around 1.40 and GBPEUR to be around 1.15 (currently 1.17),” Jackson added.

Jackson’s forecast represents a roughly 2.9% premium from current exchange rates against the dollar.

RBC Brewin Dolphin’s Mui suggested that in the coming months, the outlook for the British pound is not overly compelling — but noted that geopolitical developments could catalyze further upward movements in the longer term.

“In the near-term, further upside for the pound may be limited due to softer UK economic momentum and more scope for the Bank of England to cut rates,” she said.

“Looking ahead, one potential catalyst for the pound could be improved relations with the EU, particularly if it translates into more concrete action over time.”

Brian Mangwiro, an investment manager with the multi asset group at Barings, took a more pessimistic view.

“We are bearish GBP in the medium term. We would forecast EURGBP at 0.875 and GBPUSD at 1.30 in [six months],” he told CNBC by email on Wednesday.

He argued that the macroeconomic backdrop does not justify sterling’s performance against the greenback this year, attributing it instead to a reflection of a post-liberation day sell-off of the U.S. dollar.

“Markets had been overly bearish on the UK following Chancellor Reeves’ Budget,” he added. “Consequently, positive data surprises became supportive to GBP. However, we continue to expect UK economic growth and inflation to slow; signs are already showing, which the Bank of England is also acknowledging. This supports further BoE rate cuts, and ultimately weighs on the pound.”

Mangwiro also noted that in his view, de-dollarization risks seemed “over-blown.”

“Sentiment will likely reverse as US growth outlook rebounds and corporate earnings remain resilient,” he said. “Along with current extreme short USD positioning, this should support a USD rebound, dragging Cable lower.”

Source: cnbc

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Damon

Economic

Brandon Bell | Getty Images

Sales of new single-family homes dropped 13.7% in May compared with April to 623,000 units on a seasonally-adjusted, annualized basis, according to the U.S. Census.

That sales total was 6.3% lower than May 2024 and well below both the 6-month average of 671,000 and the one-year average of 676,000. It also lags the pre-pandemic average in 2019 of 685,000 units sold.

Wall Street analysts were expecting May new home sales of 695,000, according to estimates from Dow Jones.

This count is based on signed contracts, so people out shopping in May, when mortgage rates remained stubbornly high.

The average rate on the 30-year fixed mortgage started May at 6.83%, rose steadily to just over 7% and then settled back at 6.95% by the end of the month, according to Mortgage News Daily.

"The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%," wrote Bradley Saunders, an economist with Capital Economics.

Home builders who reported quarterly earnings recently noted high rates cutting into affordability.

"The macro economy remains challenging, as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global," said Stuart Miller, co-CEO of Lennar, on a call with analysts following the company's second-quarter earnings release. "Across the housing landscape, actionable demand has been diminished by both affordability and consumer confidence, and therefore has continued to soften."

Lennar reported lowering prices, but KB Home, which reported its quarterly earnings this week, raised prices.

Nationally, the median price of a new home sold in May was $426,600, according to the Census report, 3% above the year-earlier price.

Slower sales resulted in a significant bump higher in supply. There were 507,000 new homes for sales at the end of May. This represents a 9.8-month supply at the current sales rate, which is 15% higher than May 2024.

The last time supply was that high was briefly in the summer of 2022, after the Federal Reserve first started raising interest rates post-pandemic. Before that, supply hadn't been this high since 2009, amid the subprime mortgage crisis and the great recession.

Source: CNBC

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

President Trump told reporters that he is actively considering replacements for Federal Reserve Chairman Jerome Powell, and that he is down to three or four candidates.

"I know within 3 or 4 people who I’m going to pick," he told reporters adding of Powell "he goes up pretty soon fortunately because I think he's terrible." Powell’s term as chair expires in May 2026.

The comments from the president during a press conference in the Netherlands came at the same time as Powell sat before Senate lawmakers about 3,800 miles away in Washington for his second day of regularly scheduled testimony before Congress.

The consideration of Powell replacements comes after a period of intensifying pressure from Trump to consider rate cuts as the chairman’s guarded wait-and-see monetary policy stance continues to inflame tensions with the White House.

The president's attacks intensified at the end of last week as Trump called for rates to drop from 4.25% to 4.5% to between 1% and 2% and said of Powell and the Fed's board of governors: "I don't know why the Board doesn’t override this Total and Complete Moron!"

Trump repeated some of those points in a Tuesday social media post, calling for rates "at least two to three points lower" and saying that Powell "will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate."

"I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come."

On Wednesday Trump reiterated his oft-stated case of why Powell should lower rates by at least one percentage point immediately, citing "no inflation."

He also recounted an earlier face-to-face meeting with Powell, offering a mocking voice for Powell, and repeated his personal attacks by saying "I think he's a very stupid person actually."

Powell told Senate lawmakers today that the central bank is "well-positioned to wait" on any interest rate adjustments until it has more clarity on how Trump's tariffs will affect inflation and the direction of the US economy. He delivered the same message to House lawmakers Tuesday.

Trump is not the only one calling for lower rates. Even some of Powell's fellow policymakers — Fed governors Michelle Bowman and Chris Waller — have said in recent days that they now see cutting rates as soon as the Fed's next policy meeting in July due to recent mild inflation readings.

But other officials have pushed back on that urgency and warned that it is too soon to know the true effects of tariffs on inflation.

Some names have already circulated in Washington as possible replacement for Powell. One is former Fed governor Kevin Warsh, considered by many to be a frontrunner for the job. Waller is another current Fed official considered by some central bank watchers as a possible pick.

Bloomberg has reported that the name of Treasury Secretary Scott Bessent is also now being circulated as a possible replacement for Powell.

Bessent told lawmakers earlier this month he would like to remain in his seat until 2029, but he did not dismiss the possibility of becoming the next chair of the Fed.

Bessent said he has "the best job" in Washington and is "happy to do what President Trump wants me to do," while noting that "I would like to stay in my seat through 2029" to help carry out the administration’s agenda.

Source: Yahoofinance

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Commodity

Gold and silver prices are slightly up in early U.S. trading Wednesday. While the geopolitical situation in the Middle East has significantly de-escalated at mid-week, there are still elevated worries and uncertainties regarding an uneasy Israel-Iran ceasefire. August gold was last up $7.00 at $3,340.90. July silver prices were last up $0.058 at $35.79.

Risk appetite is not robust at mid-week, but neither is risk aversion as a fragile Israel-Iran ceasefire appears to be holding. There are also now reports that the U.S. bombing of Iran’s nuclear facilities only set back Iran’s nuclear weapons program three to six months. The Trump administration denied those reports.

This week’s fluid geopolitical developments overshadowed a downbeat Conference Board U.S. consumer confidence reading for June—dropping to 93.0 from 98.4 in May. A Wall Street Journal survey expected the June reading to come in a 99.5. The forward-looking expectations index fell to 69.0 in June versus 73.6 in May. The Conference Board says a reading below 80 signals a U.S. recession. The June report suggests U.S. consumers remain very concerned about trade tariffs and their impacts on jobs, prices and inflation.

Said David Morrison of Trade Nation in a morning email dispatch: “It’s worth remembering that China-U.S. trade issues remain unresolved. Chinese Premier Li Qiang struck a cautionary tone overnight, urging global leaders not to let trade disputes become overly politicized. The remark underlined the fact that while the Israel-Iran hostilities and subsequent ceasefire have pulled the focus somewhat, other sources of tension continue to tick along under the surface, for now.”

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to narrowly mixed openings today in New York.

The key outside markets today see the U.S. dollar index firmer. Nymex crude oil futures prices are slightly up and trading around $65.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.293%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential sales and the weekly DOE liquid energy stocks report. Fed Chair Powell today speaks to a Senate banking committee.

Source: kitco

Risk Warnings and Disclaimers

Add to Favorites

James Whitman

Central Bank

Political

U.S. President Donald Trump reignited his criticism of Federal Reserve Chairman Jerome Powell on Wednesday, speaking at the NATO summit. Trump said he plans to announce a replacement for Powell, whose term ends in May 2026, though it remains unclear whether he will attempt to remove him before then.

“I know, within three or four people, who I’m going to pick,” Trump said. “He goes out pretty soon fortunately, because I think he’s terrible.”

Trump again questioned Powell’s mental capacity, calling him a “very average person mentally.”

The president has repeatedly teased the idea of firing Powell in the past, dubbing him “Too Late” for his perceived slowness in cutting interest rates. Each time, however, Trump has backed off following negative market reactions.

On Tuesday, Powell tempered expectations for a potential rate cut in July, signaling a continued cautious approach.

“Policy changes continue to evolve, and their effects on the economy remain uncertain,” Powell said. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”

Powell’s remarks contrast with recent statements from at least two Fed governors who said they would support a July cut if inflation remains subdued.

Trump has publicly urged the Fed to slash rates by a full percentage point or more, arguing such a move could save the federal government billions - or even up to a trillion dollars - in interest costs.

Source: Investing

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

The budget bill championed by President Donald Trump could complicate next year’s tax filing season after the IRS lost one-quarter of its employees through staffing cuts, an independent watchdog reported Wednesday.

The IRS workforce has fallen from 102,113 workers to 75,702 over the past year, according to the latest National Taxpayer Advocate report to Congress. The report Wednesday offered the first official numbers on the IRS job losses associated with Elon Musk’s Department of Government Efficiency.

Most of the employees took the “fork in the road” resignation offer from DOGE rather than waiting to get laid off.

Some of the findings from the report:

Taxpayers will likely see effects of staffing reductions

The Trump administration’s efforts to shrink the size of the federal bureaucracy to a mass exodus of probationary employees who had not yet gained civil service protections and were offered buyouts through a “deferred resignation program.” More than 17,500 IRS workers took that route. The biggest cuts were in taxpayer services, the small business/self-employed office and information technology.

The report noted that the Republican administration’s proposed budget includes a 20% reduction in IRS funding next year. That’s a 37% reduction when taking into account the supplemental funding in the Biden-era Inflation Reduction Act that Republicans previously stripped away.

“A reduction of that magnitude is likely to impact taxpayers and potentially the revenue collected,” wrote Erin M. Collins, who leads the organization assigned to protect taxpayers’ rights.

The 2026 tax season could be precarious

Collins said the 2025 filing season was “one of the most successful filing seasons in recent memory,” though she warned that the 2026 season could be rocky.

“With the IRS workforce reduced by 26% and significant tax law changes on the horizon, there are risks to next year’s filing season,” Collins wrote. “It is critical that the IRS begin to take steps now to prepare.”

She said that, halfway through the year, there were concerns that the IRS had not yet undertaken key preparation steps, including hiring and training seasonal and permanent employees.

Trump’s package could add new layer of problems

The report warned about the possibility of understaffing to manage new provisions from Trump’s legislative package if it’s enacted.

“Several provisions will retroactively affect the 2025 tax year, thus impacting millions of taxpayers and requiring the IRS to quickly update tax year 2025 tax forms and programming for the 2026 filing season,” the report said.

Specifically, the House bill retroactively prohibits the IRS from allowing or making payment of Employee Retention Credit claims filed after Jan. 31, 2024.

The report also said the IRS historically receives more calls in years following significant changes in tax law, so it may need additional employees and improved digital tools to maintain its level of service.

Identity theft cases are still piling up

The IRS is dealing with delays in resolving self-reported identity theft victim assistance cases — taking up to 20 months to resolve, the report said.

As of the end of the 2025 filing season, the IRS was handling about 387,000 of these cases.

That is a slight improvement from the more than 22 months it took to resolve identity theft cases, as noted in last year’s report, which outlined roughly 500,000 unresolved cases in its inventory.

“The cycle time remains unacceptably long,” Collins said. “I continue to urge the agency to focus on dramatically shortening the time it takes” to resolved identity theft cases, “so it does not force victims, particularly those dependent on their tax refunds, to wait nearly two years to receive their money.”

Source: AP

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Bond

Traders are ramping up options wagers that 10-year (^TNX) Treasury yields are poised to sink to the lowest since April, amid dovish comments from Federal Reserve officials and a backdrop of simmering Mideast tensions.

The focus of the bets, which have drawn at least $38 million in premiums across Friday and Monday, has been around August calls on US 10-year options. The positions hedge against a drop in 10-year Treasury yields to 4% in the coming weeks, from roughly 4.3% now.

Such a tumble would bring them to the lowest since the market turmoil that followed President Donald Trump’s April 2 announcement of unexpectedly steep tariffs on US trading partners. It would also mark a sharp reversal from peak levels above 4.6% seen in May, when mounting worries around government spending in the US and other major economies sent long-term yields soaring.

A big impetus for the bullish hedges came from Fed officials, including Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman, appearing to support an interest-rate cut as early as July. Chair Jerome Powell reiterated that patience on additional easing is still warranted in congressional testimony on Tuesday, but he said cuts would come “sooner rather than later” if inflation pressures remain contained.

Treasuries steadied on Wednesday ahead of Powell’s second day of testifying before the Senate Banking Committee. Yields on two-year tenors traded at 3.79%, the lowest level in seven weeks.

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_1

Traders have been building bets on additional rate cuts into the front end of the curve. Swaps are now pricing around four basis points of easing into the July Fed meeting, compared with near zero before Bowman spoke, and a combined 60 basis points over the remaining four gatherings this year, up from 45 basis points a week ago.

A surprisingly weak reading on consumer confidence on Tuesday supported the options positions, pushing 10-year yields below 4.3% to the lowest since early May.

The bulk of activity in the options bets was seen Friday and Monday, when yields tumbled before Trump’s evening announcement of a ceasefire between Iran and Israel following more than a week of conflict.

Open interest, or the amount of new risk, has surged since Friday in the August 10-year call options. On Monday, one trade cost a premium of roughly $10 million for the 113.00 strike, which is equivalent to a yield of about 4%. Recent open interest data has shown the buying since Friday to be new risk, rather than covering existing positions.

Here’s a rundown of the latest positioning indicators across the rates market:

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_2

JPMorgan Treasury Client Survey

In the cash market, JPMorgan Chase & Co.’s Treasury client survey for the week to June 23 showed outright long positions fell 4 percentage points, shifting into neutrals. The all-client survey now shows the smallest net long position in three weeks.

Most Active SOFR Options

In SOFR options across the Sep25, Dec25 and Mar26 tenors, there were some large positions formed around the 95.6875 strikes where both Sep25 and Dec25 puts proved popular. Flows over the week included large buying of the SFRU5 95.6875/95.625 1x2 put spread, the SFRU5 95.75/95.625 put spread and the SFRZ5 95.375/95.625 put spread.

SOFR Options Heatmap

The 95.625 strike remains most popular across Sep25, Dec25 and Mar26 options, with a large amount of risk seen in the level via Sep25 puts and Dec25 puts. Other populated strikes include 95.75 and 95.875, where Sep25 puts are prominent. On Monday, there appeared to be a wave of position unwinds via sellers of multiple downside structures across Sep25 and Dec25 1-year mid-curve structures, following the dovish comments officials including the Fed’s Bowman.

Treasury Options Skew

Treasury options skew now favors calls across the strip, signaling traders are now paying a premium to hedge against a bigger bond rally versus a selloff, from the front-end out to the long-end of the curve. Long-bond skew is now favoring call premium for the first time since April. In 10-year options, demand over recent sessions has emerged for upside protection targeting a move in 10-year yields down to near 4% level via August call structures.

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_4

CFTC Futures Positioning

Net duration long positions among asset managers continued to rebuild in Treasury futures, CFTC data through June 17 shows. Over the week, asset managers added to net long positioning across 2-year, 10-year and ultra 10-year note futures by a combined $14.5m/DV01. Hedge funds added to net short position in 10-year note futures by around $4.9m/DV01, while covered a combined $4.6m/DV01 in net short positioning across long-bond and ultra-long bond futures.