26/07/2024
Written by: Ian Morley
Summary:
Early gains in the USD dissipated towards the close of European trading as markets adjusted their positions ahead of tonight’s Federal Reserve meeting, particularly focusing on the Fed’s dot plot.
The CAD experienced a decline following February’s lower-than-anticipated inflation figures, raising the likelihood of a rate cut in June. GBPCAD continues to trade near its 2022 highs.
Chancellor Jeremy Hunt hinted at the possibility of a general election in October.
Speeches:
Market Insight:
UK headline and core inflation figures fell below expectations, initially leading to a GBP sell-off due to decreased food inflation. However, the impact on GBP was neutralized as services inflation didn’t slow as much as anticipated. Attention now turns to tomorrow’s Bank of England meeting and the MPC members’ voting outcomes.
The remainder of the day is expected to be quiet as markets await the Fed meeting. Although no rate changes are anticipated, recent improvements in job and inflation data raise the possibility of a more hawkish tone in the Fed’s statement compared to December, potentially bolstering the USD further.
Analysis:
December’s Fed dot plot indicated an expected 75 bps of rate cuts throughout the year, a projection now reflected in the market. However, recent economic indicators prompt reconsideration, suggesting the Fed may need to maintain higher rates for a longer duration, potentially reducing the anticipated rate cuts for the year.