Currency news

Fed Powell in focus

Head of FX Analysis at Equals Money
-
3
min read
Publish date
23/08/24
    • Will Powell be as dovish as markets think?
    • GBPEUR gains on economic divergence


    Yesterday's currency recap

    GBP broadly rose after service and manufacturing PMIs topped estimates. EUR was hit on the back by mixed PMI numbers as well as by wage data showing a slowdown in Q2 from Q1. US PMIs came in marginally better than expected and Fed speak from Jeffrey Schmid saw USD treasury yields finishing higher across the board for the first time in 5 days. At the start of the day, GBPUSD and EURUSD were at their highest levels since July 2023.

    Today's GBP rates

    Currency pair Daily move* Indicative rate**
    GBPAUD 0.55% 1.9520
    GBPCAD 0.08% 1.7810
    GBPCHF -0.02% 1.1146
    GBPDKK 0.30% 8.7880
    GBPEUR 0.30% 1.1778
    GBPJPY 0.42% 191.0030
    GBPNOK 0.85% 13.8718
    GBPNZD 0.31% 2.1326
    GBPSEK 0.55% 13.4032
    GBPUSD -0.02% 1.3090


    *Daily move - against
    G10 rates at 7:30am, 23.08.24

    ** Indicative rates - interbank rates at 7:30am, 23.08.24

    Key data points

    Currency Event Period Consensus Previous
    N/A None today. N/A N/A N/A

    Upcoming speeches

    • USD: Fed Powell
    • GBP: Governor Bailey

    What we think

    The question today from Fed Powell’s speech will be whether he can “outdove” the already dovish pricing on US rates this week. Markets are currently pricing in 1% worth of rate cuts by the end of the year. If Powell suggests rate cuts at a moderate pace, then markets could easily price in only 0.75% worth of rate cuts over the same period, which would be USD positive.

    As mentioned earlier this week, USD was looking oversold, so a less-than-expected dovish Powell will likely see bargain hunters take advantage of the recent weakness of USD and see GBPUSD and EURUSD drop off recent highs.

    The better PMI numbers from the UK over the EU, saw GBPEUR climb higher yesterday. Any kind of hawkish or less-than-dovish tones in Governor Bailey’s speech today will likely exacerbate a higher move.

    JPY is starting the day strong after Governor Ueda left the door open for a future rate hike by the BoJ.

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