06/12/2024
Written by: Ian Morley
Summary:
EU GDP for Q2 exceeded expectations yesterday morning, maintaining the 0.3% growth recorded in Q1. However, this positive development is unlikely to change the ECB’s plans for future rate cuts, resulting in limited impact on the EUR.
In the afternoon, US consumer confidence and JOLTs job openings were higher than anticipated, causing GBPUSD and EUREUR to trade near three-week lows. However, these movements did not persist ahead of the Fed meeting tonight and the upcoming job data for the rest of the week.
Market Insight:
It has been a busy morning with the release of CPI figures from Australia and the Bank of Japan’s rate decision. Australia’s core CPI numbers were lower than expected, ruling out the possibility of a rate hike at next week’s meeting. As a result, GBPAUD is trading at a one-year high.
The Bank of Japan implemented a rate hike, raising their target rate to 0.25%. Governor Ueda stated that any further hikes by year-end would be data-dependent and that they would consider the terminal rate while assessing the impact of this year’s two hikes. Consequently, JPY is slightly stronger, with GBPJPY 4% lower month-to-date.
Today, we are awaiting the ADP payroll numbers from the US, which are expected to show 150,000 job additions in July, followed by the Fed meeting in the evening. Currently, markets are pricing in a 5% probability of a rate increase, indicating that a rate cut by the Fed is not expected today. It is more likely that today’s language will affirm a September rate cut, which will have minimal impact as markets have already fully priced it in.
EU inflation could influence the market in the morning and support the EUR if core CPI does not fall to the expected 2.8%. GBPEUR is currently trading 0.5% off 2024 highs.