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.