26/07/2024
Written by: Ian Morley
Summary
Increased risk tolerance dominated the market today, leading to a decline in yields and a weakening of the USD against various currencies, including a rebound in GBP. Earlier, UK construction PMIs showed improvement, following yesterday’s upward revision of the services PMI figures. However, caution is advised regarding GBP due to recent comments by BoE chief economist Huw Pill suggesting potential rate cuts, echoed by BoE member Swati Dhingra, who highlighted significant economic risks if interest rates remain elevated. Although money market pricing on UK rate cuts remained largely unchanged, there appears to be a dovish sentiment emerging among some BoE members.
Speeches:
Our Analysis
Market sentiment is expected to continue driving trends, potentially pushing GBPEUR towards January’s peak levels and prompting GBPUSD to rebound towards a former support-turned-resistance zone. However, there’s diminishing optimism regarding GBPUSD reaching its year-end highs, with clients adjusting their target USD purchase rates lower. EUR buyers remain focused on reaching January’s highs. Today’s trading activity is likely to mirror yesterday’s, with broader market sentiment driving decisions, particularly following the announcement of a proposed three-stage 135-day truce between Hamas and Israel.