Spectrum FX Weekly Report

GBP: The British Pound set off the week on a bullish note, extending the previous week’s rebound, drawing support from expectations that more persistent price pressures in the UK might force the BoE to keep interest rates at their current level for a little bit longer. That said, the uncertainty ahead of the UK general election on July 4th is holding back the GBP bulls from placing aggressive bets and capping further gains.

EUR: The Euro was relatively flat this morning, stabilising after Friday’s strong rebound following higher than expected inflation data. The Eurozone’s recent readings might not stop the ECB from cutting interest rates this week, but it may signal a halt in July and slower rate reductions in the coming months. In fact, financial markets have priced in nearly 25-basis point ECB rate cuts in June and 57 bps cuts in 2024.

USD: The U.S. Dollar fell further in overnight trade after clocking steep losses on Friday. Losses in the greenback came as inflation cooled as expected in April, albeit slightly. The reading sparked some expectations that the Fed could begin cutting rates in September. In fact, investors were seen pricing in a 47% chance for a 25-basis point cut, along with a 45% chance for a hold.

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