GBP enjoyed gains across the board yesterday, a bit of a surprise given there were no clear catalysts behind the move. The initial gains we saw on JPY in the morning eased as the day progressed.
*Daily move - against G10 rates at 7:30am, 30.04.24
** Indicative rates - interbank rates at 7:30am, 30.04.24
All eyes open at 10am waiting for the inflation and growth numbers from Europe. Markets are currently pricing in a 0.25% rate cut for June, followed by another 0.25% cut in September, and this morning's could well be important in determining if the needle for a second rate cut moves to July instead. Growth in the eurozone looks to be pretty stagnant to 0.1% for the 1st quarter. Later in the afternoon we have the Fed’s preferred measure of inflation, the employment cost index, and upside pressure on this will likely cause USD gains.
Inflation has been steadily declining since mid-2023 in Europe, leading markets to price in a rate cut by the ECB in June, as well as adding to bets that the ECB will cut more than the BoE and the Fed this year. Today's core CPI number is expected to decline further to 2.6%. Any further declines than this could well push the needle for the second rate cut by the ECB to happen in July.
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