US and Europe contemplate rate cuts
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Daily Currency Update
European Central Bank (ECB) policymaker lowered their annual inflation and growth forecast during yesterday's session, as they confirmed no change to the current 4.5% interest rate. A positive picture was painted on inflation, with the forecast for the year lowered from 2.7% down to 2.3% with the ECB target of 2% expected to be seen in 2025. The news increased market bets that interest rate cuts will start in the Summer. Fed chair continued to testify yesterday, which only further iterated that policymakers anticipate cutting interest rates this year. Economic data was highlighted as being important in deciding to cut rates, but so was holding interest rates at high levels for an extended period.The news helped Sterling break out of recent ranges against both the EUR and USD. GBP/USD has broken back through 1.2800 and we aren’t far off the highs at the time of writing – 1.2820. GBP/EUR has been a little more subdued in its gains, but we are back above 1.1700 and trading just shy of 1.1730. EUR/USD dipped just after midday yesterday, seeing a session low of 1.0875 but has shot higher since and has touched 1.0950 in the past few hours.
Key Movers
We end this week with US jobs data in focus. Non-farm payrolls will hold the headlines into the weekend, but we also see average hourly earnings (month-on-month) and the latest unemployment rate. As Fed chair Powell has emphasized the importance of data when cutting interest rates, strong job numbers later today could change the sentiment that the US will start cutting interest rates in the Summer. Non-farm payrolls are expected to increase by 198,000 in February which is far from the numbers seen in January – 353,000. The USD has had a volatile week and will likely remain so.Expected Ranges
- GBP/USD: 1.2710 - 1.2890 ▲
- GBP/EUR: 1.1680 - 1.1750 ▲
- GBP/AUD: 1.9210 - 1.9420 ▲
- EUR/USD: 2.082 - 1.0970 ▲