Last week we saw markets take a turn following a few weeks of Dollar strength- this was reversed by the Fed meeting which made clear that the Fed is now watching data to decide when to make it’s first interest rate cut, it was one of the most Dovish meetings in a while and Traders have brought forward their expectations of a rate cut to September instead of December. GBPUSD and EURUSD have both risen after this release and we saw GBPEUR bounce off 1.17 after there being clear profit taking at that level.
As I write this GBPEUR is trading at 1.1660, with the scope to potentially go back to 1.17 again, Monday was generally quite supportive to the rate, but as it was a Bank holiday in the UK, we did not see too much volatility on prices- this may change come Tuesday morning.
On Thursday we have the BoE meeting, where I imagine we will see most price action on Sterling this week- essentially what the rates will move on are the language used by the BoE, and the votes, i.e if any member has voted for a cut, then I can see a scenario where GBPEUR prices dip off following this, and if the BoE maintains it’s hawkish tone, then I can see GBPEUR trading back at 1.17, however I believe upside will be capped around there. We will be led by what the BoE say on Thursday to determine when a cut may happen, this will be something that will weaken Sterling eventually, but all the while a cut is not on the cards then Sterling will be strong, we may have the Summer until the former occurs.
On Friday we have UK GDP numbers where we are expecting to see growth increase to 0.4% on a 3 month average, this will be released alongside Balance of trade and industrial and manufacturing production- the latter data releases are expected negative so we may find that by Friday the Pound is weaker than how it started- so it will be important to hedge this week.