USD maintained its impressive run last week as markets continued to ease the number of rate cuts expected by the Federal Reserve (Fed) in its monetary easing cycle. This narrative was further supported by Fed Bostic’s comments that, should the data permit it, he would favour skipping a cut in the Fed's next meeting plus the minutes from the Fed's September meeting that showed not all members were in favour of a 50 basis point (bps) rate cut.
*Daily move - against G10 rates at 7:30am, 14.10.24
** Indicative rates - interbank rates at 7:30am, 14.10.24
It's a big week ahead for GBP with job and wage numbers coming out tomorrow morning and CPI numbers on Wednesday. Only two weeks ago, Governor Bailey suggested the possibility of the Bank of England (BoE) being “a bit more aggressive” with rate cuts, if supported by the data. This means that if we see lower wage and CPI numbers (particularly in the services sector) the markets might price in accelerated rate cuts, which would be GBP negative.
The European Central Bank (ECB) is holding its monetary policy meeting on Wednesday when it is widely expected to cut rates again by 25 bps. Recent data from the Eurozone has been pretty disappointing, raising the question of whether perhaps much of the unfavourable news is priced in. If the accompanying rate statement is not as dovish as markets have been anticipating we could see a EUR bounce-back.
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