GBP/USD daily chart
The pound is taking heart from the UK labour market report earlier here, with cable now moving up from 1.2870 to 1.2905 on the day. The softness in the dollar is also part of the reason but the latest push in the last 15-20 minutes is definitely more pound-driven.
The wage numbers continue to run hot, at least nominally, and that is fueling further calls for the BOE to keep at rate hikes and to tighten further.
In terms of rates pricing, markets are looking at a terminal rate of well over 6% with the peak coming in just below 6.50% for now. But as things heat up in the UK, traders are now pricing in a higher probability of a 50 bps move coming up in August. There is roughly 42 bps priced in already for next month, so that speaks to how traders are viewing how hawkish the BOE needs to be.
The central bank itself made clear that their main focus is inflation and that they are perhaps willing to risk a hard landing just for that. And markets are certainly taking that pledge rather seriously.
Going back to GBP/USD, the pair does look poised to take a run at the 1.3000 mark next with little in the way between current levels and the key figure mark.