Currency news

All eyes on Bailey and Threadneedle Street

Thanim Islam
Profile
Head of FX Analysis at Equals Money
-
3
min read
Publish date
09/05/24
    • USD benefits on Europe/US rate policy divergence
    • Decision day for GBP markets


    Yesterday's currency recap

    There was a sense of nervousness on GBP pairs following yesterday's rate cut by the Riksbank in Sweden. The move once again highlights the divergence in rate policies between central banks in Europe and the US, and brings into question the possibility that we could see a dovish BoE meeting today, and thus the markets putting in higher odds of a rate cut in June.

    Meanwhile stateside Fed member Susan Collins kept on her hawkish hat, suggesting that reaching the 2% inflation goal may take longer and thus rates will need to stay higher for longer.

    Today's GBP rates

    Currency pair Daily move* Indicative rate**
    GBPAUD 0.17% 1.8992
    GBPCAD -0.10% 1.7154
    GBPCHF -0.14% 1.1348
    GBPDKK -0.07% 8.6712
    GBPEUR -0.07% 1.1625
    GBPJPY 0.42% 194.3410
    GBPNOK -0.20% 13.6166
    GBPNZD -0.05% 2.0831
    GBPSEK 0.23% 13.6181
    GBPUSD -0.05% 1.2504

    *Daily move - against G10 rates at 7:30am, 09.05.24

    ** Indicative rates - interbank rates at 7:30am, 09.05.24

    Key data points

    Currency Event Period Consensus Previous
    GBP Bank of England Meeting May 5.25% 5.25%
    USD Initial Jobless Claims May 4th 213,000 208,000

    Upcoming speeches

    • GBP: BoE Bailey
    • EUR: ECB Cipollone, Guindos

    What we think

    So all eyes on Threadneedle Street at noon today, and whether we get a dovish BoE or not. Recent comments from Governor Bailey and deputy governor Ramsden were perceived as dovish, with suggestions that inflation will fall quickly this month. However the chief economist Pill seemed more hawkish, suggesting his thoughts on inflation hadn't changed since March. A dovish BoE will likely increase the odds of a June rate, currently at 50%, and causes declines for GBP. But given the nervousness seen over the last few days, anything perceived less than dovish and we could see a spike in demand for GBP and a retrace back to recent highs.

    Should the BoE be on the dovish side then we will likely see USD gain across the board, with the divergence on rate policy between Europe and the US highlighted again.

    Chart of the day

    So June or August for the first Bank of England rate cut? That’s the big question for the day. Markets currently assign a 50% chance of a June cut, with August seen as a done deal. Governor Bailey's comments of late have been on the dovish side, but it's worth noting one of the core measures for the BoE, services inflation, is still around 6% which may stave of the calls for an earlier hike. All eyes on the screen at noon today.

    09052024 cotd
    Source: Bloomberg Finance L.P.

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    About the author
    Thanim Islam
    Profile
    Head of FX Analysis at Equals Money

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