Pound Trades Near Monthly Lows Following Rate Cut Bets
GBP
GBP/USD is unchanged at 1.2608 (interbank), not far from Friday's low of 1.2576. GBP/EUR is at 1.1655 (interbank) after hitting 1.1625 (interbank), a two-month low.
Last week, the Bank of England (BoE) kept interest rates steady at 5.25% for the fifth consecutive time. Investors perceive a gradual shift towards dovishness at the BoE as two policymakers – Catherine Mann and Jonathan Haskel –, who previously supported rate hikes in February’s meeting, voted to maintain rates.
Additionally, Data from the Office for National Statistics released on Friday showed that UK Retail Sales remained flat in February, surpassing the market consensus of a 0.3% decline. This suggests a positive sign for the economy after the UK entered a technical recession in the latter half of last year. Market participants await more signals from...
The key event from the UK this week will be the latest GDP growth figures on Thursday, which are expected to show a 0.3% QoQ contraction and a 0.2% YoY contraction in the fourth quarter.
BoE member Mann is scheduled to speak later today.
Today’s Events (GMT):
14:15 - BoE MPC Member Mann
EUR
EUR/USD is presently trading at 1.0820 (interbank).
European Central Bank (ECB) Governing Council member Edward Scicluna recently suggested that an interest-rate cut from the ECB as early as April could be justified and should not be dismissed.
Meanwhile, Bundesbank President Joachim Nagel stated on Friday that the ECB might consider cutting interest rates before summer, potentially in June, as inflation appears to be trending back towards the 2% target.
Financial markets anticipate 89 basis points of rate cuts, with the first potentially occurring in June or July.
Additionally, the increasing speculation that the ECB will follow the Swiss National Bank (SNB) in cutting rates after its surprise move last week weighs on the Euro against the U.S. dollar.
The highlights for this week will include the release of German February Retail Sales and Unemployment figures on Thursday.
Today’s Events (GMT):
10:00 - ECB President Lagarde Speaks
USD
The dollar index, which measures the U.S. Dollar against a basket of six major currencies, has dropped to around 104.40, close to a one-month high.
Furthermore, the 2-year and 10-year yields on U.S. Treasury bonds stand at 4.60% and 4.21%, respectively.
Last week, the Federal Reserve maintained rates at 5.25–5.50% for the fifth consecutive meeting.
Following this week's FOMC rate decision, Fed Chair Powell seemed unconcerned by the higher-than-expected readings in January and February, suggesting that seasonal effects may have been at play. Powell reiterated the Fed's desire for greater confidence in sustainable inflation movement towards its 2% target before considering rate cuts.
While the Fed still indicated at least 75 basis points of rate cuts this year, the actual figure will depend largely on inflation trends.
Markets will closely watch the latest GDP and PCE price index data, the Fed’s preferred inflation gauge, due on Thursday and Friday respectively.
Today’s Events (GMT):
12:25 - FOMC Member Bostic Speaks
14:00 - New Home Sales (Feb) – Forecast: 675K
CAD
USD/CAD is currently trading at 1.3508 (interbank).
Moreover, the Canadian Dollar faced downward pressure as the BoC hinted at potential rate cuts in 2024 in its latest meeting minutes. Deputy Governor Toni Gravelle reiterated the central bank's intention for quantitative tightening to conclude by 2025, emphasizing its sustainability amidst gradual interest rate reductions.
Oil prices climbed this morning due to concerns over tighter global supply caused by escalating conflicts in the Middle East and between Russia and Ukraine. Additionally, a decreasing U.S. rig count contributed to upward price pressure. Brent crude rose 39 cents to $85.82 a barrel, while West Texas Intermediate crude futures increased to $81.11.
The main focus this week will be on Canadian GDP data for January, set to be released on Thursday. Furthermore, senior deputy BoC governor Carolyn Rogers is scheduled to speak tomorrow.
No significant events are scheduled for today
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