Buoyant optimism of the US economy continued to drive markets on Friday, seeing equity markets charging higher and erasing the losses suffered at the start of the month. With fears abating, markets' expectations of the amount of rate cuts expected by the Fed this year continued to fade. This saw USD lose ground, with the index trading near the lows of this year. GBPUSD is back trading at one-month highs and EURUSD is now trading at the highs last seen in January.
*Daily move - against G10 rates at 7:30am, 19.08.24
** Indicative rates - interbank rates at 7:30am, 19.08.24
This week's highlight will be the Federal Reserve's Jackson Hole symposium on Friday, where we expect to hear from Fed Chair Powell. The likelihood is Powell will use the opportunity to signal a cut in September but the question remains whether he’ll signal an openness to a 0.50% rate cut, as the markets were pricing in earlier this month.
The economic calendar is pretty light this week with just the release of the Fed minutes on Wednesday evening, and following that on Thursday, we have PMI numbers from UK, EU and US as well as ECB minutes and latest wage numbers. With market sentiment still on the up, we expect last week's moves to continue, seeing a likelihood of a weaker USD and a stronger GBP.
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