Positive US employment gives the US Dollar a reprieve
Daily Currency Update
There were no significant data releases in Europe yesterday, leading the Euro to lose some ground following strong retail sales figures from the US. The Pound also declined yesterday, impacted by the robust US economic data. Recent reductions in UK inflation have led to increased speculation about consecutive rate cuts by the Bank of England. The probability of a UK rate cut in September has risen to 44%, up from 36% earlier in the week, following the release of strong GDP figures. Additionally, the UK posted solid manufacturing production growth of 1.1%.St. Louis Federal Reserve President Alberto Musalem noted that the risks associated with employment and inflation appear to have shifted. He suggested that the time might be approaching for a change in the Fed's restrictive monetary policy. This sentiment has been echoed by several other Fed members, with a 25 basis point rate cut in September now looking highly likely.
Key Movers
The Eurozone is currently grappling with sluggish growth, but the Euro continues to find support due to the anticipated convergence of interest rates between the US and Europe over the next 12 months. UK inflation figures released on Thursday showed a slowdown, but certain volatile components within the data suggest that markets may temper their expectations regarding the extent of interest rate cuts for the rest of the year. With inflation gradually normalizing, it appears likely that the Monetary Policy Committee (MPC) may opt to reduce rates in September to help stabilize growth in the UK.In the US, jobless claims came in better than expected on Thursday, giving the US Dollar a boost. With full employment and inflation now appearing more balanced, the focus is shifting from inflation to the labour market. Markets are now anticipating a total of 100 basis points in rate cuts, distributed evenly over the next four Federal Reserve meetings.
Expected Ranges
- GBP/USD: 1.28 - 1.2930 ▲
- GBP/EUR: 1.1670 - 1.1790 ▲
- GBP/AUD: 1.9365 - 1.9510 ▲
- EUR/USD: 1.0940 - 1.1045 ▼