Busy week ahead with Fed and BoE rate decisions due
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Daily Currency Update
This week's major event in the UK is the Bank of England's monetary policy decision, scheduled for midday on Thursday. This could potentially be the first interest rate cut since March 2020. With inflation back at its 2% target after three years of exceeding it, some believe it is time to reduce borrowing costs from their current 5.25%. The decision appears to be finely balanced, with financial markets estimating a roughly 50/50 chance of a cut. Although the benchmark Consumer Price Index is at 2%, other indicators such as services inflation and wage growth remain elevated, which might prompt the Bank to hold off until September. Given the uncertainty, there is likely to be some market volatility when the decision is announced.Today's main event features the new Chancellor of the Exchequer, Rachel Reeves, who is expected to announce the shelving of various infrastructure projects in her address to Parliament. She will assert that she has inherited a budget shortfall of approximately £20 billion from the Conservatives.
Earlier this month, GBP/USD broke above 1.30 for the first time in over a year but has been slipping since as the likelihood of a rate cut increases. GBP/USD is currently at 1.2850 and GBP/EUR at 1.1840.
Key Movers
The US Federal Reserve will announce its latest interest rate decision on Wednesday evening, with markets expecting no change in policy from Fed Chairman Jay Powell. Powell is likely to prepare markets for a potential rate cut in September, in line with recent comments from various Fed officials.Additionally, on Wednesday, the Eurozone will release its latest inflation estimate, with the overall CPI expected to slip from 2.5% to 2.4% year-over-year.
On Friday, the monthly US jobs report will be released, with the Non-Farm Payroll figure predicted to show an increase of 177,000 jobs in July.
Currently, the EUR/USD remains rangebound at 1.0850.
Expected Ranges
- GBP/USD: 1.2800 - 1.2940 ▼
- GBP/EUR: 1.1795 - 1.1910 ▼
- GBP/AUD: 1.9575 - 1.9715 ▲
- EUR/USD: 1.0805 - 1.0905 ▼