06/12/2024
Written by: Ian Morley
Summary:
The British Pound (GBP) strengthened after the UK’s services and manufacturing PMIs exceeded expectations. In contrast, the Euro (EUR) faced pressure due to mixed PMI results and data showing a slowdown in Q2 wage growth compared to Q1. U.S. PMIs slightly outperformed forecasts, and comments from Federal Reserve official Jeffrey Schmid contributed to a rise in U.S. Treasury yields across the board, marking the first increase in five days. At the start of the day, both GBP/USD and EUR/USD were trading at their highest levels since July 2023.
Speeches:
Outlook:
Today’s focus is on Fed Chair Powell’s speech, where the main question is whether he will adopt an even more dovish stance than the market has already priced in. Currently, markets expect a 1% rate cut by the end of the year. If Powell hints at a slower pace of cuts, possibly reducing expectations to 0.75%, this could boost the USD.
Earlier in the week, we noted that the USD appeared oversold. If Powell’s comments are less dovish than anticipated, it could trigger a rebound in the USD, causing GBP/USD and EUR/USD to retreat from recent highs.
The stronger-than-expected UK PMI figures compared to the EU drove GBPEUR higher yesterday. Should Governor Bailey’s speech lean hawkish or even just less dovish, it could further strengthen the GBP.
Meanwhile, the Japanese Yen (JPY) started the day on a strong note after Governor Ueda hinted at the possibility of a future rate hike by the Bank of Japan.