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Market Update

• Posted by currencies in Bank of England, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• August 3, 2023
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GBP/USD is battling to stay above 1.27 after losing ground against USD due to strong payroll Data which exceeded growth expectations in July, which has now raised expectations for the Non-Farm Payrolls data set to be released tomorrow. After The Federal Reserve raised interest rates by 25 basis points last month, Jerome Powell stated that economic data would be key when looking at the strength of The U.S economy before deciding their next rate decision in September’s meeting.

The key focus for today is The Bank of England’s rate decision set to be released at Midday. With UK Inflation falling to 7.9% in June from 8.7% in May, it looks like a 25 basis point is favoured over a repeat of last month’s 50 basis point hike. However it should be noted that it isn’t a given regarding The Bank of England’s decision, with some analysts suggesting a 34 basis point hike could be introduced due to The Central Bank being split on whether to hike by 25 basis points or 50 basis points. What does seem guaranteed, is that anything other than a 50 basis point hike could lead to further drops for GBP against major currency pairs.

Market analysts seem to suggest an underwhelming rate hike could take GBP/USD closer to 1.25, whilst a 50 basis point hike could support Sterling and drive it back closer to 1.30. This is due to the fact that the majority of central banks seem to have stated coming close to pausing on rate hikes in the near future. Evident with The Royal Bank of Australia pausing their rates earlier this week.

We round the week off tomorrow with the all important Non-Farm Payroll data in The US. And although initial predictions suggested a drop off in figures, Wednesday’s strong payroll data has increased optimism that the release tomorrow could follow suit and exceed predictions. Either way, the next 48 hours are set to be fairly volatile again for GBP.