We saw more USD weakness yesterday as markets continued to price out the risk of any imminent full blown trade war, as a result the USD index hit its weakest level in a week.
As the afternoon unfolded, the ADP payrolls exceeded expectations, yet this positive momentum was tempered by a softer ISM services figure.
The EUR drew some marginal support following European Central Bank (ECB) Lane’s comments who stated he sees inflation risks in the economy.
JPY extended its gains from the morning following the strong wage numbers which supported the notion of interest rates continuing to rise.
*Daily move - against G10 rates at 7:30am, 06.02.25
** Indicative rates - interbank rates at 7:30am, 06.02.25
All eyes are on the Bank of England (BoE) today for the next BoE interest rate decision.
Markets are predicting a 0.25% rate cut today backed by 8 of the MPC members with 1 dissenting vote. The key point to look for will be the bank's revised projections on growth and inflation. A lowering of growth forecasts could see markets price in further rate cuts this year with interest rates dropping to 3.75% versus current projections of 4%. If this is the case then GBP will likely weaken.
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