Escalating inflation and persistent labour market tightness, at least in the near term, are shifting yield spread trends. In the view of economists at Westpac, GBP/USD remains vulnerable but also likely to consolidate.

Heightened concerns of recession in the UK

“The combination of persistently higher inflation and the cost of living crunch on final demand put the UK at the top of major economies at risk of stagflation.”

“GBP/USD now appears to have lifted its likely consolidation range trading to 1.24-1.28 but with risks of flipping lower if business surveys were to weaken.”