26/07/2024
Written by: Ian Morley
Summary:
A surprising increase in eurozone CPI led to gains in the EUR, raising doubts about potential rate cuts this year. GBPEUR dropped from recent highs, and EURUSD rose to May’s highs. The USD weakened following lower-than-expected personal spending numbers, with core PCE numbers aligning with expectations and having minimal impact on rate expectations. The GBP weakened in line with declining equities in the US. Lower-than-expected GDP numbers from Canada triggered a sharp sell-off in CAD.
Speeches:
Market Insight:
The week is expected to start quietly, with only the release of final manufacturing PMI numbers today. Attention for the rest of the week will be on US job numbers, including JOLTs job openings, ADP, and nonfarm payrolls (NFPs). Last month’s lower-than-expected readings caused a month-long USD sell-off in May. Any indication of a weakening job market will be positive news for the Fed and could bring forward expectations for a rate cut.
Another key event will be the ECB meeting. Markets anticipate a 0.25% rate cut by the ECB, which is largely priced in. Given higher May inflation and Q1 wage growth, a hawkish cut by the Bank could be favourable for the EUR. The Bank of Canada is also expected to take similar action this week.
For GBP, the primary data point will be the DMP inflation expectations, which will influence rate expectations.