26/07/2024
Written by: Ian Morley
Summary:
As widely anticipated, the ECB reduced interest rates from 4% to 3.75%. As highlighted in our market reports, the Bank did not confirm additional rate cuts, noting that their forecast suggests inflation will not reach the 2% target until 2026.
The EUR attempted to strengthen in response to this move, but gains were limited as markets speculated on the timing of the next rate cut. Meanwhile, US jobless claims exceeded expectations, underscoring a weakening job market ahead of today’s nonfarm payrolls report.
Speeches:
Market Insight:
Last month’s weaker-than-expected jobs report initiated a month-long downtrend for the USD throughout May. Today’s report could once again influence the greenback’s direction. Markets are expecting a slight increase in job additions to 185,000 in May, up from 175,000 in April. However, some investment banks predict another lower-than-expected figure, continuing the trend of soft job data seen all week. If this occurs, it could strengthen the odds of a September rate cut, leading to USD weakness. Conversely, a strong jobs number could see demand for USD rise, especially after the recent month of weakening, ahead of next week’s CPI numbers and the Fed meeting.