Daily Currency Update
GBP/USD has slowly tracked higher over the past 24 hours heading towards 1.29 as markets await this evening's interest rate decision from the US Federal Reserve. With little data from the UK over the past 24 hours, the move higher is due to some slight dollar weakness rather than any domestic catalysts. Next Thursday sees the Bank of England's interest rate decision with most analysts now believing that a 0.25% hike will be unveiled rather than another aggressive 0.5% move. After last week's bigger-than-expected drop in inflation most expect the Bank to end its tightening cycle sooner than previously predicted however with CPI at 7.9% 3-4 more rises are likely warranted which should help the pound maintain its value as we head into the summer holidays. GBP/USD currently sits at 1.2890 with GBP/EUR around 1.1650 ahead of another quiet day from the UK.
Key Movers
Tonight's Fed decision is this week's main event with a 0.25% raise in borrowing costs priced into the dollar's value. As usual, the messaging from Jay Powell will be the main area of interest, and should he indicate that the Fed will pause after tonight's hike then we could see the dollar weaken. Inflation in the US is now at 3% y/y much closer to its 2% target compared to the Eurozone and the UK and with the delayed effects of previous rate hikes yet to be felt in the economy then we could be at the summit of this tightening cycle. Tomorrow sees the European Central Bank's July interest rate decision and like the Fed and BoE, it's looking like ECB Chief, Christine Lagarde will elevate borrowing costs by 0.25%. Her commentary about the health of the bloc's economy will be of particular interest given the raft of poor PMI numbers seen on Monday (especially from Germany). Aside from New Homes Sales data scheduled from the States at 3 pm (which will likely be ignored), it's relatively a relatively quiet day. EUR/USD remains rangebound currently sitting at 1.1065.
Expected Ranges
- GBP/USD: 1.2820 - 1.3000 ▲
- GBP/EUR: 1.1600 - 1.17200 ▲
- GBP/AUD: 1.8970 - 1.9140 ▲
- EUR/USD: 1.0945 - 1.1140 ▲