Dollar Hits 13-Month Low on Rate Cut Bets, Key Inflation Data Due This Week
GBP
GBP/USD has eased slightly to 1.3195 (interbank) after jumping as high as 1.3229 (interbank) on Friday for the first time in 17 months. GBP/EUR has also settled higher and is currently trading at 1.1802 (interbank)
BoE governor Andrew Bailey's comments on Friday mentioned that it was "too early to declare victory" over inflation signaling a less aggressive stance. Seemingly, the BoE’s policy-easing cycle will be slower than that of other major central banks providing further support to the Pound.
The BoE lowered interest rates in August in a knife-edge vote and is expected to hold rates unchanged in September, with another cut priced in for November.
Throughout the rest of the week, UK economic data releases remain limited with BoE member Catherine Mann scheduled to speak on Wednesday and the latest Nationwide House Price Index figure due on Friday.
No significant economic events are scheduled for today
EUR
EUR/USD is currently trading at 1.1178 (interbank), not far from its Friday high of 1.1201, a level last seen in July of last year.
On Friday, Philip Lane told the Kansas City Federal Reserve’s annual global symposium in Jackson Hole, that there had been “good progress” so far in taming price pressures across the Euro area. Yet, he struck a circumspect tone about how much relief the ECB will be able to provide borrowers.
Markets expect the ECB to lower interest rates twice more this year, with the next move set for September.
This week will see Eurozone inflation data for August, due for release on Friday. It will be pivotal in shaping the European Central Bank’s decision on interest rates for September.
The report, which follows national releases beginning on Thursday, comes after a small but unexpected uptick in inflation in July, signalling challenges in bringing inflation under control.
Today’s events (GMT+1):
09:00 - German Ifo Business Climate Index (Aug) – Actual: 86.6 vs Forecast: 86.0
USD
The Dollar Index which measures the U.S. dollar against a basket of six major currencies, languished at 100.69, just off the 13-month low of 100.60 reached at the end of last week.
The dollar is weaker following comments from Fed Chair Jerome Powell on Friday that were cemented expectations for a rate cut. Powell went on to state that further cooling in the labour market was unhealthy, and said it was time to begin adjusting policy accordingly.
Speaking at the Jackson Hole Symposium, Powell noted that inflation was close to the Fed’s 2% annual target, but said that the timing and scale of any rate cuts will still depend on economic data.
This week will see key inflation data with the latest PCE price index data due Friday set to offer more definitive cues on rates. The economic calendar also includes revised second-quarter GDP figures on Thursday along with the weekly report on initial jobless claims.
Today’s events (GMT+1):
13:30 - Core Durable Goods Orders (MoM) (Jul) - Forecast: 0.0%
13:30 - Durable Goods Orders (MoM) (Jul) - Forecast: 4.0%
CAD
USD/CAD is currently trading at 1.3508 (interbank).
Data released by Statistics Canada on Friday showed that Canadian Retail Sales declined by 0.3% MoM in June from a fall of 0.8% in the previous reading, in line with the market consensus.
Retail Sales excluding automobiles, unexpectedly rose by 0.3% MoM in June, better than the estimation of a decline of 0.2%.
Meanwhile, the Bank of Canada (BoC) is expected to cut an additional 75 basis points (bps) by year-end.
Oil prices have risen as media reports showed no progress towards an Israel-Hamas ceasefire while hostilities in the region persisted. Brent crude oil rose 0.8% to $79.59 a barrel, whilst West Texas Intermediate crude (WTI) rose 0.6% to $75.45 a barrel.
Investors will closely monitor Canadian Gross Domestic Product (GDP) for the second quarter on Friday.
Today’s events (GMT+1):
13:30 - Wholesale Sales (MoM) (Jul) - Forecast: -0.6%
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