26/07/2024
Written by: Ian Morley
Summary:
USD weakness persisted into the weekend as market activity focused on US data points, suggesting that the Federal Reserve may need to cut interest rates later this year. Just a month ago, there was speculation about a potential rate hike, but as expectations for a rate cut solidified, the USD continued to decline. Meanwhile, GBP remained stable ahead of this week’s inflation data.
Speeches:
Market Insight:
Today’s attention will be on several speeches from Fed officials, including Bostic, Barr, Waller, Jefferson, and Mester. Both GBPUSD and EURUSD are testing resistance levels seen in April. If the hawkish rhetoric from the Fed fails to bolster the USD, these resistance levels could be breached. Additional insights will be available with the release of the Fed minutes on Wednesday evening.
This week’s primary focus will be on the UK inflation data, due on Wednesday morning, which is anticipated to show a reduction in price pressures. Recent comments from the Bank of England have hinted that the Bank might opt to cut rates sooner than market expectations. A lower services and core inflation print could shift expectations towards a rate cut in June—currently priced at a 60% probability—potentially leading to GBP weakness. Conversely, higher-than-expected inflation figures could boost the GBP.
On Thursday, attention will shift to PMI data from the EU, UK, and US as we continue to assess the economic performance of these regions.
Analysis:
The key highlight this week is inflation data, particularly in relation to the Bank of England’s potential rate cut in June. While there will be another inflation reading before the June meeting, this week’s figures will likely influence GBP trading leading up to the June inflation report and BoE meeting.