Hot US job numbers saw markets reduce the number of rate cuts expected by the Federal Reserve. While 75 bps of rate cuts was being projected by the end of the year, the number has now been revised to 50 bps. As a result, USD continued to gain with EURUSD breaching prior supports and GBPUSD reaching new lows.
In contrast with Governor Bailey's comments the previous day, Bank of England's (BoE's) Chief Economist Huw Pill, said he was in favour of gradual rate cuts as opposed to the faster pace suggested by Bailey. This resulted in GBP gains early the following day.
*Daily move - against G10 rates at 7:30am, 07.10.24
** Indicative rates - interbank rates at 7:30am, 07.10.24
We're expecting a fairly quiet week ahead, with Fed speak and US CPI numbers on Thursday. Last Friday’s job numbers have reduced the total number of rate cuts in the Fed’s monetary easing cycle, and, unless we see the CPI come in a lot lower than consensus this Thursday, then we would expect the USD to sustain its recent gains, especially with the continued tensions in the Middle East.
Focus will also likely fall on the upcoming election which could see markets take a risk-averse stance, further enhancing demand for USD.
For GBP this week, the only thing to really pay attention to will be August’s GDP numbers, expected to come in at 0.2%.
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