26/07/2024
Written by: Ian Morley
Summary:
GBP pairs showed signs of nervousness following the recent rate cut by the Riksbank in Sweden. This underscores the divergence in rate policies between European and US central banks. There’s speculation about a dovish BoE meeting today, potentially increasing the likelihood of a rate cut in June.
Meanwhile, Fed member Susan Collins maintained a hawkish stance, suggesting that reaching the 2% inflation goal might take longer, necessitating prolonged higher rates.
Speeches:
Market Insight:
All attention is on Threadneedle Street today to gauge the BoE’s stance. Recent remarks from Governor Bailey and deputy governor Ramsden hinted at dovishness, anticipating a swift decline in inflation this month. However, chief economist Pill struck a more hawkish tone, suggesting no change in his inflation outlook since March. A dovish BoE could raise the likelihood of a June rate cut to 50%, leading to GBP depreciation. Conversely, any stance less dovish than expected could prompt a GBP surge back to recent highs.
A dovish BoE stance may bolster the USD against other currencies, underscoring the rate policy divergence between Europe and the US.
Analysis:
The looming question for today is whether the Bank of England will cut rates in June or August. Markets currently assign a 50% probability to a June cut, with August considered more certain. Governor Bailey’s recent comments leaned dovish, but the relatively high services inflation, around 6%, might delay calls for an earlier hike. All eyes will be on the screen at noon today.