26/07/2024
Written by: Ian Morley
Summary:
Currency markets experienced a period of limited movement yesterday ahead of the awaited US GDP figures for Q1 2024, with an anticipated decrease in growth from 3.4% to 2.5.
Despite disappointing CBI manufacturing data, the pound managed slight gains, propelled by recent hawkish remarks from the Bank of England, which have dampened expectations of a rate cut.
The euro also saw an increase following the release of better-than-expected German IFO business climate index data. Additionally, ECB’s Nagel’s statement suggesting that a June rate cut might not lead to further cuts lent support to the single currency.
Speeches:
Market Insight:
All attention is focused on the forthcoming US Q1 GDP figures, along with tomorrow’s Core PCE report, which serves as the Fed’s preferred gauge of inflation.
At the outset of the year, the market was pricing in the likelihood of the US implementing interest rate cuts six to seven times. However, this projection has since dwindled to merely one or two cuts as the robustness of the US economy persists, defying expectations of a sharp deceleration in both growth and inflation.
With the US elections scheduled for November, market participants are just starting to contemplate the potential impact of a Trump presidency on the US dollar. Early indications suggest that a Trump administration would advocate for a weaker currency to enhance US export competitiveness. During his previous term, Trump repeatedly urged the Fed to lower interest rates to devalue the dollar, citing the deliberate currency weakening strategies employed by the EU and Japan to bolster overseas trade.