26/07/2024
Written by: Ian Morley
Summary:
Friday’s trading activity mirrored that of Thursday, with the USD extending its gains and the GBP weakening across all fronts. The GBP suffered additional setbacks in the morning following remarks by Governor Bailey hinting at potential rate cuts in upcoming meetings, despite better-than-expected UK retail sales figures being largely disregarded.
Fed Bostic’s late Friday speech projected a rather hawkish stance, suggesting the possibility of only one rate cut by the Fed this year.
Speeches:
Market Insight:
The economic calendar for the week ahead remains relatively quiet, with the primary focus being on the release of core PCE inflation figures from the US on Good Friday. These figures are anticipated to be robust, likely bolstering the USD. Notably, markets will be closed on this day, potentially leading to fluctuations primarily driven by end-of-month and quarter flows, as well as commentary from various central bank speakers throughout the week. The week kicks off with speeches from ECB Holzmann and BoE Mann. Mann, who recently shifted her MPC vote from advocating for rate hikes to maintaining rates, is expected to maintain a hawkish stance, emphasizing the need for prolonged higher rates.
Early FX trading patterns indicate a slight weakening of the USD following interventions aimed at stabilizing the CNH and JPY, both of which experienced weakness last week. Concerns persist regarding further GBP depreciation due to dovish adjustments in rate expectations.
Analysis:
After an impressive start to the year for the GBP, last week saw a setback as dovish revisions in rate expectations increased the likelihood of a rate cut in June from 50% to 85%. Despite reaching 2023 highs earlier in the year, GBPEUR has struggled to sustain momentum beyond this level, indicating strong resistance. GBPUSD is currently finding support at the 200-day moving average.