Stocks rallied back near all time highs on Friday and we saw a weaker USD on the back of media reports suggesting that the Fed could be considering a 0.50% rate cut on Wednesday.
*Daily move - against G10 rates at 7:30am, 16.09.24
** Indicative rates - interbank rates at 7:30am, 16.09.24
We're expecting a big week ahead with all eyes on Wednesday evening's Fed meeting. Market pricing on the Fed rate cut policy is now suggesting a front loaded scenario with the bulk of the larger rate cuts coming before Christmas and as a result, we are starting the week with a softer USD. The other key factor from the meeting will be the Fed's revised dot plot and forecasts.
On Thursday, we have the Bank of England's rate decision. Markets are currently expecting the update to be uneventful with no rate changes and limited forward guidance on future rate cuts. However, this could all change on Wednesday morning with the release of August's CPI, as the services number is still a key metric and continues to be sticky.
US retail sales are due tomorrow; UK's - on Friday.
All in all, the current expectation is for a dovish Fed. Going into Wednesday, this will likely favour a weaker USD market and a stronger GBP and EUR due to improved risk sentiment.
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