Market Data

GBP/EUR is still staying healthy above 1.16, the highest it’s been since December 2022. This is mainly due to German states inflation cooling more than expected over the past month. This is welcome news for The European Central Bank, but it also more or less confirms an end to their rate hike cycle. Sticking with inflation, The Euro-Area’s inflation is also due to be released this morning at 10am, with expectations suggesting another marginal drop-off to 5.5%. If this data comes out as expected, I would expect further comments from Christine Lagarde cementing the possibility of a rate pause later this month.
The major talking point recently has been the debt ceiling negotiation in The U.S, with concerns that failure to get a limit increase by Monday 5th June would see The U.S economy default and edge closer to a potential recession. However, although the House of Representatives voted in favour of a bill to suspend the debt ceiling, which ultimately weakened The USD slightly, it does appear that the chance of a default is getting smaller and smaller as it now goes to The Senate for approval. Attention in the markets now turn back to The Federal Reserve officials with regards to their next interest rate meeting later this month. Philadelphia Federal Reserve President Patrick Harker indicated earlier this week that there is a willingness to pause interest rates in June, to allow The Central Bank more time to assess upcoming economic data.
We end the week tomorrow with the highly anticipated Non-Farm Payroll data, one of the main data releases among a few others that The Federal Reserve look at when weighing up whether to hike rates or pause. Current forecasts suggest that roughly 60,000 less jobs will have been created than in May when compared to April, however it is an extremely volatile data release and I would expect The USD to reflect this volatility tomorrow leading up to the release at 1:30pm UK time.

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