GBP/USD has rebounded to the mid-1.25s on Thursday. In the opinion of economists at Westpac, surprisingly firm business reports may support the pound, but it remains vulnerable as it consolidates.

Pressure on PM Johnson is likely to resume 

“BoE releases its latest inflation expectations survey at the end of next week. It is likely to be well above the peak of its data history (4.4% in 2008) and a spike to 5.0% or more will cement further BoE rate hikes but will also increase the risk of a cost-of-living induced recession. Countering that risk have been a series of persistently firm business-related surveys.”

“There are two by-elections likely towards the end of June which will be seen as key tests of Johnson’s and Conservative support. A constant flow of dissent could lead to a full leadership challenge should those Tory seats be lost.” 

“Despite the prospect of higher rates, GBP remains vulnerable to retesting its recent lows.”