GBP held onto gains from the morning's higher wage numbers seeing gilt yields rise and markets ease back the number of rate cuts expected by the Bank of Engalnd (BoE) next year. Pricing is now suggesting only two rate cuts of 25bps across 2025.
*Daily move - against G10 rates at 7:30am, 18.12.24
** Indicative rates - interbank rates at 7:30am, 18.12.24
This morning’s CPI numbers showed inflation rose in line with expectations, thus having limited impact on GBP and barely moving the needle for market pricing on rate cuts. GBP is marginally lower this morning following yesterday's gains. Next for GBP will be tomorrow's BoE meeting.
Final CPI numbers are due from the eurozone this morning, but we are expecting limited impact from this. Later focus falls on the Federal Reserve (Fed) meeting.
We are expecting a move from the Fed to trim rates by 25bps, while also revising their earlier projections for next year's rate cuts. The revision comes in light of the prospect of a fiscal stimulus under President-elect Trump next year.
All in all, barring any dovish surprises from the Fed, we expect USD to remain well supported
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