26/07/2024
Written by: Ian Morley
Summary
The beginning of the week saw a relatively calm market, with equities edging slightly higher and treasury yields showing a minor decline. The GBP recovered from losses following disappointing retail sales on Friday, while the USD retreated due to lower treasury yields. GBPEUR made another effort to reach December highs.
According to a report from Axios, Israel has proposed a two-month ceasefire in Gaza, aiming to include the release of all hostages, potentially reducing geopolitical risks that have impacted markets recently.
Market Analysis
Chinese equities rose on speculation of a potential US$278 billion rescue package by Chinese authorities to stabilize stock markets. Consequently, equity futures suggest another day of gains, leading to a weaker USD at the start of the day. FX movements are expected to follow market risk appetite and treasury yields.
In other developments, the Bank of Japan hinted at the possibility of lifting interest rates from negative territory later this year, with market pricing indicating a 35% chance of this occurring in April.
Chart Focus
Interest rate differentials continue to favour GBPEUR, as the Bank of England is expected to cut interest rates less than the ECB. Since the beginning of the year, the pair has risen by 1.65%, making another attempt to reach December highs. A breakthrough at this level could open up the possibility of reaching highs observed last summer.