UK employment data supports interest rate cut
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Daily Currency Update
British pay growth cooled to a more than two-year low in the three months to July, while employment rose, according to data released this morning. Average weekly earnings were 5.1% higher than a year earlier, marking the lowest increase since June 2022. This news is likely to prompt the Bank of England to consider cutting interest rates before the end of the year, as it has previously indicated it would monitor wage growth as a key factor for potential rate cuts. Currently, there is a 25% chance of a rate cut in September, but November now appears to be a more likely timeframe for the next reduction. Following the release, Sterling briefly surged above 1.3100 against the USD, although it has since eased slightly. GBP/EUR also saw a rise to 1.1865 before retreating.Key Movers
With data thin until tomorrow, market participants will shift their focus to the upcoming US CPI report, scheduled for release at 1:30 PM on Wednesday, and the European Central Bank's decision on Thursday at 1:15 PM. The US CPI could influence whether the Fed opts for a 50 basis point rate cut instead of the 25 basis points currently anticipated. Last week's mixed jobs data, which has been a key focus for Fed Chairman Powell, suggests a rate cut is likely, although non-farm payrolls have underscored the expected economic slowdown. The European Central Bank is expected to implement a 25 basis point rate cut on Thursday, driven by falling inflation, which is likely to strengthen the EUR amid anticipated rate cuts elsewhere.Expected Ranges
- GBP/USD: 1.3060 - 1.3140 ▲
- GBP/EUR: 1.1830 - 1.1890 ▲
- GBP/AUD: 1.9590 - 1.9710 ▲
- EUR/USD: 1.1010 - 1.1080 ▼