26/07/2024
Written by: Ian Morley
Summary:
Yesterday’s European trading session saw markets holding steady ahead of the US FOMC interest rate meeting at 7pm. Preliminary data, including German Retail Sales and US ADP employment, indicated lower figures than anticipated. As anticipated, the Fed maintained interest rates, prompting a strengthening of the US dollar. However, during the press conference, Chair Powell contradicted expectations of an early March rate cut, causing a significant drop in market pricing from 65% to 35%.
Attention now shifts to the UK MPC and Bank of England Governor Bailey, with the UK interest rate announcement scheduled for 12 pm today.
Speeches:
· Speeches by ECB Lagarde and Lane (EUR) and BoE Bailey (GBP).
Our Analysis:
Following the Fed’s announcement, market expectations for the first US rate cut have been delayed, but skepticism persists regarding the Central bank’s guidance for three rate cuts this year. Investors continue to trade under the assumption of at least six rate cuts.
The Bank of England’s interest rate announcement today is projected to maintain rates at a 16-year high of 5.25%. Market focus will be on the MPC’s voting patterns and accompanying forecasts, with expectations leaning towards only one member advocating for a hike. Pre-meeting, markets predict the first cut by the June meeting, potentially in May.
Additionally, EU inflation data released today is expected to reveal a decline in the Core Inflation rate from 3.4% to 3.2%.