Interest rate guidance holds headlines
Written by
Daily Currency Update
Bank of England Governor Andrew Bailey signalled on Wednesday that the U.K. could see four interest rate cuts over the next year if inflation continues to decline. In a pre-recorded interview for the Global Boardroom Digital Conference, hosted by the Financial Times, he confirmed that the plan includes four quarter-point cuts. This has lowered expectations for a rate cut in December.In the U.S., private sector employment rose by 146,000 jobs in November, with annual pay increasing by 4.8% year-over-year, according to data released yesterday. This figure was slightly below the forecast of 152,000 jobs. Additionally, economic activity in the services sector expanded for the fifth consecutive month, with the services PMI registering 52.1%, though it was below the forecast of 55.7%.
GBP/USD is back above 1.2700 this morning, reaching 1.2740 in the past few hours. The data release yesterday would have supported this move, but Federal Reserve Chair Jerome Powell’s comments about the U.S. economy’s strength and the central bank's ability to show restraint in cutting interest rates also helped drive the movement. EUR/USD has edged closer to 1.0550, while GBP/EUR faces resistance at 1.2100 after briefly touching 1.2090 overnight.
Key Movers
French Prime Minister Michel Barnier will resign on Thursday after lawmakers voted to topple his government, deepening the political crisis in the eurozone's second-largest economy. This development further weakens the European Union, which is already reeling from the collapse of Germany's coalition government, and comes just weeks before U.S. President-elect Donald Trump returns to the White House with pending tariffs. Barnier had attempted to push an unpopular budget through a fragmented parliament without a vote. The draft budget aimed to save 60 billion euros ($63 billion) in an effort to reduce the growing deficit.GBP/EUR has tested the 1.2100 level several times this week but has yet to break through. If it does, it could push the currency pair higher. EUR/USD briefly dipped below 1.0500 a few times this week but is slightly higher overnight, likely due to comments from Fed Chair Jerome Powell, indicating that interest rate cuts will be more restrained.
Expected Ranges
- GBP/USD: 1.0670 - 1.0790 ▲
- GBP/EUR: 1.2040 - 1.2150 ▲
- GBP/AUD: 1.9610 - 1.9870 ▲
- EUR/USD: 1.0510 - 1.0580 ▲