26/07/2024
Written by: Ian Morley
Summary:
Trading activity remained subdued across European markets as investors awaited updates on US inflation. Notably, the New Zealand Dollar exhibited strong performance following a hawkish stance from the RBNZ. Clients displayed heightened engagement ahead of key data releases, particularly concerning GBPEUR, amidst concerns of breaching 2023 highs. Activity on GBPUSD and EURUSD remained balanced, with investors awaiting the outcome of the US inflation figures.
Revisions to US inflation forecasts indicated a downward adjustment for Q1 of the current year, while Q2 and Q3 projections were revised upward, leaving Q4 unchanged. However, these revisions failed to spur significant movements in the USD.
Speeches scheduled include:
Insights:
This week stands in stark contrast to the previous one, with significant events expected, particularly in the UK. Key releases include job figures (Tuesday), inflation data (Wednesday), GDP numbers (Thursday), and retail sales (Friday). Concerns persist regarding stagflation in the UK, and this week’s data releases will provide crucial insights into the trajectory ahead.
US inflation and retail sales figures will serve as critical indicators for the US economy. Last month’s inflation surpassed expectations, leading to recalibrations in anticipated rate cuts for the year. A further increase in inflation on Tuesday could diminish the likelihood of a March rate cut, which would be USD positive.
In the eurozone, focus remains on Q4 GDP numbers, anticipated to reflect stagnant growth.
Friday witnessed continued record highs in US equities, fostering a positive sentiment in the markets that could bolster GBPUSD and EURUSD ahead of UK job data and US inflation figures.
Analysis:
GBP emerges as the second-best performing currency thus far in the year, facing its first significant test this week. Markets increasingly anticipate a rate cut by the BoE in August, with tomorrow’s release of wage growth data for the three months to December pivotal. A decline below 5.6% could accelerate rate cut expectations, exerting downward pressure on GBP. Release time for these figures is set for 7 AM tomorrow.