Last week traders showed their hand by selling off the Pound on expectations that the BoE would be cutting interest rates this Thursday- with GBPEUR now trading at 1.1850 and GBPUSD trading at 1.2860. Now UK elections are over I feel the cut is warranted. It seems that either way, the Bank of England are not expected to cut aggressively in this cycle so generally we shouldn’t see much damage to the Pound over all. Still, we will have to wait for the announcement on Thursday to fully understand their current thinking and models.
However, before we get to Thursday, we have a few economic releases that should affect the market, as Monday is quiet we will start with Tuesday where the EU will be releasing flash GDP numbers- which are expected to rise year on year to 0.6%, which is positive news for the Euro. This will be then followed by positive consumer confidence data for the EU which should also help boost the Euro on Tuesday morning. On Tuesday afternoon we have German inflation which is expected to come out at 2.2%, this is coming out as expected so I am not expecting any changes to the market from this.
On Wednesday we have Flash European inflation which is expected 0.1% lower, this will clear the path for more cuts in Europe, which may weaken the Euro slightly, this is worth watching if you are trading GBPEUR or EURUSD. The main release on Wednesday is the Fed interest rate decision, and though we are not expecting a cut, it seems one may be close- so if we do not see it in July, then this opens up the floor for the next meeting- but we will be waiting to see what Powell says- if we do see a surprise cut however then I expect to see a lot of volatility in the market, however there is a slim chance of this.
On Thursday, aside from the BoE decision, we have manufacturing PMI out from Europe, the UK and the U.S, Europe’s and U.S’s are expected under the 50 level and the UK’s is expected higher at 51.8- so only the Pound should move higher on the back of this release.
Lastly, on Friday we have NFP’s out of the U.S- where we are expecting a release of 185k- I am expecting another lower release this month as the last few months have been revised lower- so this should be a volatile event for the USD.