Dollar Steadies Around One-Month High
GBP
GBP/USD is presently at 1.2671 (interbank). GBP/EUR has declined slightly to 1.1850 (interbank) after a peak of 1.1910 last week, marking its highest since August 2022.
This week, all eyes are on the Bank of England's policy meeting on Thursday. It’s anticipated that the BoE will maintain rates, quashing any remaining hopes within the Conservative party for a rate cut before the July 4 election.
Current market sentiment has shifted, now factoring in about a 40% chance of a rate reduction in August and a 70% probability for September, with sticky wage and service sector inflation.
Additionally, the UK will release its May inflation figures on Wednesday, expected to align with the BoE's 2% target for the first time in nearly three years, although core inflation is predicted to stay above 3%.
No significant events are scheduled for today
EUR
EUR/USD is currently at 1.0700 (interbank), showing a slight retreat.
The Euro is facing downward pressure due to apprehensions that upcoming snap elections in France could destabilise the fiscal health of the Eurozone’s second-largest economy, especially with the right-wing National Front leading in recent polls. French Finance Minister Bruno Le Maire expressed concerns last Friday, warning that victory for the far-right or left-wing parties could plunge the country into a financial crisis due to their expansive fiscal agendas.
ECB President Christine Lagarde evaded a question on the instability in French financial markets last Friday, stating only that the ECB is committed to achieving its inflation objectives.
This week, the Eurozone is set to release its latest Purchasing Manager Indexes (PMI) for June, with analysts keenly watching for indications that the economic recovery is picking up speed.
Key speeches from European Central Bank officials this week will include remarks from President Christine Lagarde and Chief Economist Philip Lane on Monday, followed by Vice President Luis de Guindos on Tuesday.
Today’s Events (GMT):
09:00 - ECB's Lane Speaks
10:00 - ECB President Lagarde Speaks
10:00 - Wages in euro zone (Q1) – Forecast: 3.10%
11:00 - Eurogroup Meetings
12:30 - ECB's De Guindos Speaks
USD
The dollar index, measuring the U.S. dollar against a selection of major currencies, remains stable at 105.54, having reached a peak of 105.80 last Friday, its highest since May 2.
Last week, the Federal Reserve underscored the need for further signs of declining inflation before considering any reductions in borrowing costs, which bolstered the U.S. dollar's strength.
Investors are now keenly focused on assessing the U.S. economy's robustness and the timing of potential Fed rate cuts, expected no earlier than September. This attention is particularly directed towards Tuesday’s retail sales data for May, with economists anticipating a modest 0.3% increase following April's unexpected stagnation.
Consumer spending remains a critical indicator for Wall Street, as market participants evaluate the broader economic impacts of elevated interest rates.
Additionally, throughout this week, the financial community will have opportunities to hear from several Federal Reserve officials, including Williams, Kashkari, Daly, and Barkin, which could provide further insights into future monetary policy directions.
Today’s Events (GMT):
13:30 - NY Empire State Manufacturing Index (Jun) – Forecast: -12.50
17:00 - FOMC Member Williams Speaks
18:00 - FOMC Member Harker Speaks
CAD
USD/CAD is currently positioned at 1.3744 (interbank).
Last week, speeches by BoC Governor Tiff Macklem and Deputy Governor Sharon Kozicki did not reveal new details regarding the Bank of Canada's monetary policy direction.
Following a 4% increase last week, oil prices have slightly retreated amid expectations for higher demand during the US driving season. Brent crude has fallen 17 cents to $82.54 a barrel, while West Texas Intermediate (WTI) crude is down to $78.37 a barrel.
This Wednesday, the BoC is set to publish its summary of deliberations from its recent meeting, during which it reduced its primary interest rate by 0.25% to 4.75%.
Governor Macklem has indicated that further rate reductions could be forthcoming if inflation pressures continue to subside, although decisions will be made incrementally.
Moreover, this Friday's retail sales data for April will be closely monitored. Initial estimates indicated a 0.7% increase in sales for April, an improvement from a 0.2% decline in March.
No significant events are scheduled for today
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