Author Archives: Ricky Kielkowski

The pound suffered its largest one-day slump since April as markets raised bets that the Bank of England would reduce interest rates next week.

However, money market pricing suggests an important rise in expectations that the Bank of England will cut interest rates at its August 1 policy meeting.

The odds of such a move edged above 50%, in tandem with rising expectations for interest rate cuts in the U.S., confirming the linkage between U.S. and UK rate expectations.

The odds of such a move increased above 50%, aligning with rising expectations for interest rate decreases in the United States, showing the connection between US and UK rate expectations.

Meanwhile, core-PCE inflation increased by 2.9% annually in the second quarter (vs. +2.7% forecast). In contrast, the German Ifo and French business sentiment indicators for July declined and came in below estimates.

Looking ahead, the key release of importance will be the June report of US core-PCE inflation. The consensus is for a small fall of 2.5%, while the Q2 data released yesterday implies it could be higher. meanwhile, US personal consumption and income projections for June are due.

For additional insights on how this could affect your business or to capitalise on market volatility – please reach out to speak to one of our experts.

In today’s economic calendar, German IFO which measures businesses confidence in Germany is set to rise for business sentiment and current conditions.

Later on today, we have a mixture of US data releases. The number of people who have filed for unemployment benefits is set to come in at 238k.

US Gross Domestic Product is priced in to rise by 2 percent in the second quarter of 2024 (April – June). Economic growth in the States has been supported by an increase in consumer spending and inventory building, however markets are still pricing in a September interest rate cut.

Pound Sterling has fallen this morning against a number of currencies in the G10 (JPY, CHF, USD & EUR) after a stock market selloff. A decline in investor sentiment has pushed GBPUSD to a two-week low.

GBPEUR has lost most of its gains sustained over the past week; but still remains marginally close to the two-year high it achieved earlier this month.

For additional insights on how this could affect your business or to capitalise on market volatility – please reach out to speak to one of our experts.

GBPJPY is down a significant 5 percent as pressure mounts of the Bank of Japan to reduce interest rates. GBPAUD is up 2% over the course of the last week.

Sterling has fallen about 0.9% since its post-CPI peak against the dollar on Wednesday. Sales numbers have left the pound on the back foot this morning, with a 1.2% decrease in June, significantly worse than the 0.6% forecast, and this is mostly due to cooler weather. This reduces sales on a net basis in Q2 and should be somewhat of drag on economic growth.

People are becoming more hopeful about the possibility of near-term rate reduction from the Bank of England. With no further data for markets to digest today, speculators will turn their attention to the next round of PMI releases early next week.

The ECB did provide some assistance for the euro. With core inflation rising and some officials expressing regret over the first rate cut last month, the rate pause at 3.75% shocked no one.

Markets are still expecting a second rate decrease in September, which Lagarde described as a wide-open meeting. Aside from some current account data this morning, the focus will shift to next week’s PMIs and today’s dollar dynamics.

This afternoon, we have a handful of Fed speakers to wrap up the week before the emphasis shifts to GDP and core PCE inflation next week.

For additional insights on how this could affect your business or to capitalise on market volatility – please reach out to speak to one of our experts.

Already released this morning, UK earnings growth eased to 5.7 percent (previous 6%). Unemployment remained at 4.4 percent suggesting the labour market is healthy.

This afternoon, we have the European Central Bank interest rate announcement. The ECB dropped rates last month from a record high of 4.5 percent; inflation and wage growth remains high in the Eurozone, so markets are pricing in a September rate cut.

The ECB policy decision will be followed by Christine Lagarde’s news conference. Investors will keep a close eye on her comments to grasp her outlook on future rate cuts and how the EU economy is fairing.

In the States, Fed policymakers hinted that inflation is moving in the right direction, however, they want the US Federal Reserve to be patient as there is possibility inflation might rise again.

Pound Sterling protected its recent gains after UK CPI inflation released above the market consensus, apply pressure on the Bank of England to hold interest rates in August.

GBPEUR is trading 2 percent over its yearly average moving rate. GBPUSD has lost some of it gains but is still at its highest level this year.

For additional insights on how this could affect your business or to capitalise on market volatility – please reach out to speak to one of our experts.