26/07/2024
Written by: Ian Morley
Summary:
The USD continued to gain ground on Friday amid a stock sell-off, fuelled by diminishing expectations of Fed rate cuts and a surge in risk aversion before the weekend. GBPUSD and EURUSD hit new lows for 2024, breaking recent trading ranges and potentially encouraging further downward movement in both pairs.
Speeches:
Market Insight:
This week, attention shifts to the UK with the release of key economic indicators including jobs data, inflation figures, and retail sales. For GBP to strengthen, it will need to mirror recent US economic performance. Alternatively, a weaker job market and rising inflation could exacerbate GBP’s recent struggles. Additionally, seven BoE speeches are scheduled for this week, commencing with Breeden’s today.
US retail sales data, expected later today, is anticipated to reveal subdued spending in March, reflecting a slowdown in consumer demand, which may exert minor downward pressure on the USD.
Despite missile attacks on Israel over the weekend, FX markets have shown limited reaction, with the usual flight to safety and increased demand for USD not materialising due to minimal loss of life and restrained retaliation.
Given the USD’s recent gains and anticipated divergence in monetary policy, both GBPUSD and EURUSD are susceptible to further declines.
Analysis:
This week’s UK data releases carry significant implications for the Bank of England’s rate-cutting strategy. Markets currently estimate a 50% chance of a cut in June, with a 96% probability for August. Any data indicating weaker wage pressures and inflation, particularly in the services sector, could strengthen the likelihood of a June rate cut and contribute to further declines in GBP.