Market moves were fairly subdued yesterday, with geopolitical risks still simmering in the background given the continued threat that Israel will retaliate against the recent strikes from Iran. ECB president Christine Lagarde was on the wires insinuating that a rate cut could be coming imminently, as they continue to monitor disinflation trends.
Fed Powell spoke yesterday evening, suggesting that the Fed will wait longer than anticipated to cut rates in light of recent inflation numbers from the US.
*Daily move - against G10 rates at 7:30am, 17.04.24
** Indicative rates - interbank rates at 7:30am, 17.04.24
GBP has caught a bid this morning as CPI numbers came in slightly hotter than expected. Whilst the direction of travel for inflation is downwards, March’s readings suggest that it's perhaps not slowing quick enough, and as a result money markets have pushed back when they expect the BoE to cut to September, with a probability factor of 90% - similar to what the markets expect from the Fed. GBP should benefit from this in the short-term.
For the rest of the day we have the final CPI readings from Europe, which will unlikely move the needle for when the ECB will cut interest rates. Should the Fed’s beige book suggest stronger than expected growth in the US, then will likely be perceived as positive for USD.
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