Following Governor Bailey's comments yesterday morning, GBP finished lower across the board, in what was a dramatic sell-off for the currency.
USD demand firmed up as the PMI readings for ISM services came in higher than expected – the USD index is now trading at its highest levels since mid August and markets have continued to reduce the number of rate cuts expected by the Fed in the easing cycle.
*Daily move - against G10 rates at 7:30am, 04.10.24
** Indicative rates - interbank rates at 7:30am, 04.10.24
US job numbers will be the key data metric today. It will be interesting to see their impact on the Federal Reserve's easing expectations, potentially steering the US toward a smooth economic transition and influencing USD.
USD has had its best week since the end of August, with market narrative suggesting that too many rate cuts are expected by the Fed. A firmer job number today would add to this.
BoE chief economist Huw Pill is speaking today. There is a possibility he could try and temper the dovish comments made by Governor Bailey yesterday – it wouldn’t be the first time the two have disagreed over the direction of the BoE rate. However, any push back should be taken with a pinch of salt because any uptick in GBP influenced by his comments will likely be short-lived.
The other thing to keep an eye on, going into the weekend, will be whether markets, driven by concerns that Israel may decide to strike Iranian crude facilities, will take a safe haven approach. If so, then expect GBP to be weaker and currencies like USD, CHF, JPY to benefit.
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