06/12/2024
Written by: Ian Morley
Summary:
US CPI figures were lower than anticipated, with year-on-year CPI at 3.3% versus 3.4%, and core CPI decreasing to 3.4% in May from 3.6% in April. Consequently, markets are now anticipating two rate cuts by the Fed this year, leading to a broad sell-off in USD. GBPUSD approached the highs seen in March this year, while EURUSD recovered the losses incurred since last week’s job numbers and the fallout from the snap election announcement in France.
However, the afternoon USD weakness did not persist after some surprisingly hawkish elements in last night’s Fed meeting and dot plot. The Fed now projects only one rate cut this year, down from three forecasted in March, with four Fed members expecting no cuts (up from two previously), seven seeing one cut, and eight predicting two cuts. Commenting on yesterday afternoon’s CPI number, Fed Chair Powell remarked that it is a step in the right direction but is only one reading. As a result, the greenback regained most of the ground lost from the CPI announcement.
Speeches:
Market Insight:
Today brings another set of inflation numbers with the US PPI figures. A weaker number could prompt GBPUSD and EURUSD to attempt to reach yesterday’s highs again. However, given last night’s Fed comments and the subsequent price action, any gains are likely to be short-lived. It’s important to consider that the EUR may remain under pressure due to political uncertainty in France, and next week’s UK CPI number and BoE meeting pose risks for markets aiming to push GBP much higher.