Europe cuts interest rate as expected
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Daily Currency Update
The European Central Bank (ECB) met expectations yesterday, delivering a widely anticipated 25 basis point rate cut. President Lagarde confirmed that the decision was unanimous, and the accompanying monetary policy statement dampened expectations for another cut in October. As a result, market participants now speculate that the next potential rate cut could occur in December. The ECB's cautious approach reflects concerns over inflation in the services sector and wage growth, with a commitment to making decisions on a 'meeting-to-meeting' basis, guided by incoming data.At the same time, the US Producer Price Index (PPI) was released, coming in hotter than expected, similar to the Consumer Price Index (CPI) earlier in the week. However, unlike previous reactions that strengthened the USD, the dollar weakened after a Wall Street Journal article suggested that the Federal Reserve was debating whether to implement a rate cut of 25 or 50 basis points. This news pushed GBP/USD to a session high of 1.3150, while EUR/USD approached the key 1.1100 level.
Key Movers
Macroeconomic data is expected to have minimal impact on FX volatility today, as no major announcements are scheduled. With bank holidays in Japan and China early next week, market activity is likely to remain muted. As a result, attention will shift to the UK CPI data, set for release on Wednesday morning, followed by the US interest rate announcement and FOMC statement later the same day.Expected Ranges
- GBP/USD: 1.3040 - 1.3210 ▲
- GBP/EUR: 1.1810 - 1.1880 ▲
- GBP/AUD: 1.9500 - 1.9680 ▲
- EUR/USD: 1.1010 - 1.1130 ▲