Market Report - 11/07/2024
US inflation falls ; GBPUSD hits 11 month high
It has been a busy day in the economic calendar in what has been a relatively quiet week up until now. There has been a host of data releases out of Europe, the US and the UK causing volatility in the FX markets.
GBP has remained well supported following a stronger than expected GDP reading from the UK. The forecast was for 0.2% growth which would eclipse April’s flat reading of 0%. However, the actual GDP print came out at 0.4% growth which has diminished the odds for an August rate cut from the Bank of England. As a result, we have seen support blossom for the pound.
GBP/EUR rose to monthly highs of 1.1876 today prompting a supportive rally for the UK currency which has brought into play the possibility of breaching the next resistance level of 1.1902. With expectations of an August rate cut now seemingly further away, market makers are forecasting further strength for the pound as we edge towards the MPC meeting on 1st of next month.
In the U.S this afternoon, it was announced that inflation in the States had come in lower than expected, boosting hopes of an interest rate cut soon. Headline annual inflation eased to 3% last month, down from 3.4% recorded in May – whilst economists had expected a drop to 3.1%. Meanwhile, the core rate which is monitored very closely by the Fed dipped lower to 3.3%, beating expectations again with economists predicting a reading of 3.4%. GBPUSD reacted immediately, shooting higher to 1.2950.
Sterling enjoyed a rally against the U.S Dollar in the aftermath of this mornings data, prior to the CPI release. The rate had ticked up to its highest level since July 27th 2023 (11-month highs) around 1.2880. The USD has been widely sold-off following Jerome Powell’s press conference on Monday, where he shocked markets by suggesting that despite inflation remaining stubborn in the US, we could well see the FOMC cut rates twice before the end of the year. Powell also suggest that the first cut is likely to come in September. This is a big change to what was previously expected, as markets were pricing-in no easing this year at all.