26/07/2024
Written by: Ian Morley
Summary:
The UK budget failed to boost the GBP’s performance against the G10 currencies. However, GBPUSD showed resilience, trading back towards 2024 highs despite disappointing US job numbers. The ADP payrolls report indicated only 140,000 jobs added in February, below the expected 150,000. Additionally, JOLT job openings revealed a slowdown, while the JOLTS quit rate dropped to its lowest since 2018, suggesting a weakening job market. Fed Chair Powell’s comments on potential rate cuts, even without inflation falling to 2%, weighed on the USD, leading to a decline in Treasury yields and the USD falling the most in a month. EURUSD reached its highest levels since January’s end.
Speculation on a looming rate hike by the Bank of Japan intensified following better-than-expected earnings and hawkish remarks from BoJ member Junko Nakagawa, resulting in strength for the JPY across the board.
Speeches:
EUR: ECB President Lagarde.
Market Insight:
Today’s focus shifts to the EUR with the ECB rate decision. No rate change is expected, and the language is anticipated to align with recent rhetoric, waiting for Q1 data before considering rate cuts. Of interest will be the ECB’s growth and inflation projections for the year and how they affect rate cut timing. USD movement is likely limited as markets await cues from tomorrow’s nonfarm payroll numbers. Yesterday’s Spring Budget had minimal impact, suggesting muted activity for GBP.
Analysis:
Yesterday’s decline in USD, spurred by a lower JOLTS quit rate, softer ADP numbers, and Powell’s comments, signals a weakening job market with reduced wage pressures and slower inflation, as indicated by the lower quit rate.