On Friday, Fed Chair Powell confirmed that a September rate cut is coming. Initial market reaction saw further weakness in USD while GBPUSD hit its highest levels since early 2022 and EURUSD - a new July 2023 high.
Markets are still largely pricing in a 0.25% rate cut, with a focus on job numbers on September 6th to see whether we could get a 0.5% rate cut.
*Daily move - against G10 rates at 7:30am, 27.08.24
** Indicative rates - interbank rates at 7:30am, 27.08.24
We're expecting a quiet day ahead today so let's look at the rest of the week instead.
On Wednesday, the focus will be on Nvidia’s results to gauge the risk appetite in markets for this week. On Thursday, we have second growth estimates for Q2 from the US and on Friday we have core PCE inflation numbers from the US, as well as August's inflation numbers from Europe.
GBP looks well supported at the start of the week and will rely on continued optimism in markets, with risk appetites continuing to march towards July’s highs versus EUR and USD. Going into the month's end, much will depend on the greenback itself.
It's worth noting that seasonally this tends to be USD's strongest month. During this same time period, over the last 5 years, GBPUSD has seen a 2.4% drop on average and EURUSD a 1.9% drop on average. USD buyers will do well to take advantage of this current weakness in the currency.
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