Ahead of the Bank of England meeting this Thursday, the British Pound has been consolidating its recent gains. Markets are pricing in a 50% chance of a quarter-point rate decrease, but opinions on whether it will happen now or at the September meeting are divided. This would be a dovish hold if there was a strong commitment to a September rate decrease, which is not totally compatible with the Pound’s recovery.
While investors wait for more clues from preliminary GDP figures for the second quarter from Germany and the Eurozone, the euro was comparatively flat. Stronger than anticipated readings could help the shared currency gain ground against its competitors. Important pan-EU Harmonised Index of Consumer Prices inflation data are expected to be released on Wednesday, providing investors with important insight into when the ECB may decide to reduce interest rates again.
After data from the PCE price index on Friday indicated some slowing of inflation, the US dollar continued its downward trend. The number increased speculation that the Fed will soon have the confidence to start lowering rates by September. This week’s main focus is on the Fed meeting, where it is anticipated that interest rates will remain unchanged. Investors, however, will be observing the central bank for any indications regarding when it intends to start reducing rates.
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