Week in Currency - 29/07/2024

Interest rate decisions from BoE and the Fed this week.

GBP

The Bank of England has held rates at a 16-year high of 5.25% since August last year, but a majority of economists think it will begin its cutting cycle at its monetary policy meeting on Thursday.

More than 80% of economists polled by Reuters over the past week predict the bank will deliver a quarter point cut this week but traders in swaps markets are less convinced, pricing an even split on the chances of the central bank lowering interest rates or not. Markets have shied away from bets on an August rate cut in recent weeks after a surprisingly robust UK economy and stronger than expected services inflation have weakened the case for the central bank to lower borrowing costs.

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USD

The Federal Open Market Committee is poised to again hold its benchmark interest rate steady at a 23-year high of 5.25-5.5% when its two-day gathering ends on Wednesday. While the rate decision itself looks to be uneventful, the meeting will serve as an important platform to further tee up a monetary policy pivot as early as September.

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EUR

European Central Bank vice-president Luis de Guindos hinted at a possible interest rate cut in September, singling out the ECB's new projections as the "most important" factor in determining whether inflation is falling back to target. The ECB left rates on hold earlier in the month, but President Christine Lagarde said its next meeting in September was "wide open", with several policymakers openly considering more cuts as inflationary pressures ease.

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Have a good week!

Estuary FX

This week’s key data: