RedFX Update: A busy end to the week
Global tensions and reactions are concisely summarised by this quote:
“The killing of Hamas leader Ismail Haniyeh in an Israeli air strike on Tehran has prompted risks of a potential escalation in the Israel-Iran war. Historically, geopolitical tensions turn investors risk-averse but investors have already priced in Middle East woes.”
GBP: The Bank of England announces interest rates tomorrow alongside a statement and Press Conference. The market will be looking for indications as to whether they will cut rates in August or September. Given recent data, the bank of England is likely to remain cautious but signal a cut soon – if the wording suggests more cuts, more quickly, then GBP has the potential to fall.
GBP/USD has fallen slightly to 1.20820 and GBP/EUR trickled lower yesterday toward 1.1800.
USD: Decent employment data yesterday kept the USD on the front foot and bodes well for Friday’s monthly employment data which is always closely watched. JPMorgan and the market all expect job creation of between 150,000 – 200,000 for the previous month.
The Fed is announcing the results of its latest meeting tonight, along with a statement and press conference. All eyes will be on the very specific wording of the statement and indications of when the Fed will begin cutting rates. 2 0.25% cuts are priced in for 2025, but if the wording is more aggressive, the USD will fall. The easing inflation and a moderating labour market make more cuts, more quickly than expected, a possibility.
EURO: Better than expected growth data yesterday buoyed the Euro posting 0.3% GDP growth), along with out-performances by France and Spain. Germany’s weak data threatened to overshadow this positivity but unfortunately German weakness (across the board) has become the norm for financial markets.
The markets now expect the ECB to cut rates (again) in September.
EUR/USD sits at 1.0820, having been higher last week.
AUD: A terrible 2 weeks for the Aussie Dollar, falling aggressively against all currencies, not helped last night after weaker inflation data was announced. Good retail sales data could not buoy the currency either!