Home Daily Commentaries Investors await key US inflation data due later today.

Investors await key US inflation data due later today.

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Friday 26 July, 2024

Daily Currency Update

This week, the European single currency has been trading softer which may be due to an unclear short-term outlook from the European Central Bank (ECB). Markets are anticipating two more interest rate cuts this year, totaling 50 basis points. Adding to the Eurozone's challenges, the German IFO Institute of business confidence dropped from 88.6 to 87 in July, marking its lowest level since February and falling short of market expectations.

Meanwhile, the Pound has edged lower against the Euro, nearing 0.8450, as speculation grows about a potential UK rate cut this summer. Markets are predicting 50 basis points of cuts this year, which would bring the UK base rate down to 4.75% by the end of the year. The Bank of England's recent data shows that the UK economy is growing robustly, but persistent high wage growth continues to drive stubbornly high inflation.

In the United States, GDP expanded at an annual rate of 2.8% in the second quarter, up from 1.4% in the first quarter. Following the release of this data, the US Dollar strengthened against both the Euro and the Pound. The Federal Reserve faces a delicate balancing act, aiming to ensure that any rate cuts later this year do not exacerbate inflationary pressures while still supporting economic growth.

Key Movers

ECB President Christine Lagarde has reaffirmed the governing council's commitment to returning inflation to their 2% target in a "timely fashion." She emphasized that policy rates will remain sufficiently restrictive to achieve this goal. The ECB will adopt a data-dependent, meeting-by-meeting approach to determine the appropriate level and duration of interest rate restrictions.

In the UK, economists predict a decrease in loan defaults for the remainder of the year, driven by improving business sentiment. They forecast that the UK economy will grow by an annualized 0.8% in 2024, which is double their previous prediction in April. If the Labour Government's growth plans are successful, this forecast could be revised upward.

In the US, the June personal consumption expenditures (PCE) data will be released later today. It is expected to rise by 0.1%, matching the figure from May. The annual pace is anticipated to be 2.6%, which, although softening, remains above the Federal Reserve's target rate of 2%. Market participants will closely monitor this data release, as any surprises could significantly influence the direction of the Dollar.

Expected Ranges

  • GBP/USD: 1.2850 - 1.2900 ▼
  • GBP/EUR: 1.1840 - 1.1880 ▼
  • GBP/AUD: 1.9600 - 1.9655 ▼
  • EUR/USD: 1.0825 - 1.0875 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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