26/07/2024
Written by: Ian Morley
Summary
Yesterday’s European trading session saw cautious movements, marked by a slightly weaker USD and a stronger EUR ahead of the release of the Fed minutes later in the day.
The minutes revealed a sense of hesitancy among policymakers regarding early interest rate cuts. Fed Bowman echoed this sentiment separately, suggesting that rate cuts are not warranted at present. This stance didn’t offer anything new to the hawkish faction, resulting in little change for the USD.
Equities, however, rebounded from earlier losses following Nvidia’s positive sales guidance, fostering a higher risk appetite that weighed on the USD, causing GBPUSD and EURUSD to climb.
Market Insight
The release of PMI data today offers a solid basis for analysis and potentially increased market volatility. Forecasts anticipate the UK to maintain PMI activity at 52.9, a slight dip to 51.8 for the US, and continued contraction in Europe. This ongoing disparity in economic performance supports expectations of stronger growth in the UK and US compared to the eurozone, likely bolstering GBP and USD against the EUR in the medium term.
The prevailing risk-on sentiment, buoyed by Nvidia’s results, continues this morning, with GBPUSD and EURUSD seemingly poised to approach their 50-day moving averages before the PMI release.
Analysis
Recent PMI data hints at possible signs of recovery in the UK economy for the beginning of this year, following its recession in the latter part of last year. This potential recovery, if sustained, could provide support for GBP, especially against the EUR. Nonetheless, considerations about the Bank of England’s interest rate policy implications remain pertinent, suggesting a cautious optimism regarding the UK’s economic outlook.