Euro Retraces, U.S. PCE Data in Focus This Week
GBP
GBP/USD has rebounded to 1.2659 (interbank) following a dip near a five-week low post the Bank of England’s latest policy meeting. GBP/EUR has slipped to 1.1816 (interbank).
Last week, the BoE opted to maintain interest rates unchanged, though some policymakers noted the decision was finely balanced, heightening expectations for a cut at the August meeting. BoE Governor Andrew Bailey remarked optimistically, "It's positive news that inflation has returned to our 2% target," emphasizing the need for sustained low inflation as rationale for holding rates steady.
Financial markets now anticipate the BoE initiating rate reductions starting in August. Speculation gained momentum after the central bank's mildly dovish remarks on the interest rate trajectory.
Additionally, rate cut prospects have been bolstered by headline inflation aligning with the targeted 2% rate. This week’s focal point will be Friday's release of the latest GDP figures.
No significant events are scheduled for today
EUR
EUR/USD is currently trading at 1.0705 (interbank).
EUR/USD has recovered by 0.2% to 1.0718, rebounding from recent losses despite a surprise decline in German business sentiment in June, reported by the Ifo Institute. The business climate index dropped to 88.6 from May's 89.3, falling short of expectations at 89.7.
Ifo president Clemens Fuest commented, "The German economy is struggling to overcome stagnation," attributing the downturn to economic challenges.
The euro has depreciated over 1% this month following strong performances by right-wing parties in the June European Parliament elections, prompting French President Emmanuel Macron to call for snap elections.
This week, market attention will focus on German retail sales, employment data, and speeches from ECB members.
Today’s Events (GMT):
09:00 - German Ifo Business Climate Index (Jun) – Actual: 88.6 vs Forecast: 89.4
14:00 - ECB Supervisory Board Member Fernandez-Bollo Speaks
15:15 - ECB McCaul Speaks
16:30 - ECB's Schnabel Speaks
USD
The dollar index, measuring against a basket of currencies, is down 0.2% at 105.235, having touched 105.91 last week.
The dollar gained strength following stronger-than-expected PMI data last week, indicating resilience in the U.S. economy and potentially supporting the Federal Reserve in maintaining elevated interest rates.
Economists anticipate the PMI growth to ease to 2.6% in May, with a soft reading likely reinforcing expectations of a rate cut as early as September, currently priced at a 65% likelihood according to the CME FedWatch tool.
This week's focus will be on the latest Personal Consumption Expenditures (PCE) and GDP data releases. Fed officials have emphasized the need for sustained inflation deceleration before considering rate cuts, with Friday's release of the Fed's preferred inflation gauge pivotal in shaping rate expectations.
Today’s Events (GMT):
08:00 - Fed Waller Speaks
19:00 - FOMC Member Daly Speaks
CAD
USD/CAD is trading at 1.3686 (interbank).
Brent crude has decreased by 0.4% to $84.88 per barrel, while West Texas Intermediate (WTI) crude is down 0.4% to $80.41 per barrel.
Despite expectations of potential rate cuts by the BoC, the Canadian Dollar has strengthened. Market participants await clarity on interest rate outlook from BoC Governor Tiff Macklem's scheduled speech later today.
This week, focus will be on Canada's CPI report for May, with annual headline CPI anticipated to ease to 2.6% from April's 2.7%.
Today’s Events (GMT):
18:45 - BoC Gov Macklem Speaks
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