26/07/2024
Written by: Ian Morley
Summary:
A sense of caution surrounded GBP trading yesterday in anticipation of this morning’s job wage data, leading to profit-taking on last week’s gains. Meanwhile, USD strengthened in line with rising treasury yields.
Speeches:
• GBP: Remarks from BoE’s Mann and Bailey.
Market Insight:
This morning, signs emerged of a cooling UK job market, as wage growth declined more than anticipated, unemployment rates rose, and employment figures decreased. Consequently, GBP saw a slight decline for the day. While challenges for the job market are apparent, this dataset does not justify revising earlier BoE rate cut expectations. Any further GBP declines may be moderate ahead of tomorrow’s GDP figures, which could indicate a rebound in January’s growth.
Later today, attention shifts to US inflation figures, with market participants eager to see whether continued easing in consumer prices will bolster the case for weakening USD, potentially resulting in higher GBPUSD and EURUSD rates. Recent weeks have seen the greenback shed 50% of its 2024 gains. Unexpectedly high inflation would confirm ongoing inflationary pressures, likely prompting a sharp retreat in GBPUSD and EURUSD from their recent highs.
Analysis:
Today’s significant event is the CPI release, determining whether it provides sufficient impetus for markets to continue selling USD, or if a sharp reversal of recent weakness occurs. Headline inflation is projected to have risen to 0.4%, while core inflation is anticipated to have slowed.