17/05/2024
Written by: Ian Morley
Summary:
Friday’s US job numbers fell below expectations, leading to a weaker USD due to lower job additions, subdued wage growth, and higher unemployment. This prompted markets to increase the odds of a Fed rate cut in September, earlier than previously anticipated. Although the initial reaction weakened the USD, GBPUSD and EURUSD hit fresh 1-month highs before both pairs retraced.
Speeches:
Market Insight:
With a shorter week ahead, attention is primarily on the UK, with the Bank of England meeting on Thursday and GDP numbers for Q1. Recent comments from BoE members indicate a divergence in views on inflationary and monetary policy, suggesting it may be premature for the Bank to signal a rate cut in June (currently 50% probability). The vote split on Thursday will be closely watched to gauge the timing of potential rate cuts. Friday’s GDP numbers are expected to show a rebound to 0.4% growth in Q1, while GBP starts the day lower.
Following last week’s Fed meeting and Friday’s job data, markets have discounted the likelihood of a Fed rate hike this year. As a result, USD trading is expected to be range-bound, especially with a quiet US calendar. Today’s focus is on EU retail sales and Fed speaker Kashkari’s insights on recent events.
Analysis:
Recent events in the US have erased hawkish rate expectations, bringing forward the anticipation of a rate cut to September. Consequently, recent USD gains have retraced, and we anticipate consolidation this week amid a subdued US calendar.