Excel Currencies Blog

'It's too early to declare victory' said BoE Governor Bailey last Friday at Jackson Hole. He was referring to UK inflation and this has meant money markets and economists have once again pushed back their forecasts for the next UK interest rate cut. 

'Higher rates for longer' has been the call by many for some time now and this is already in full flow. It is now expected the UK will skip a rate cut next month, meaning only 1 more is forecast for 2024 at 0.25%. This is between 0.5%-1.5% lower than most had anticipated for this year overall. 

It does mean the Pound has strengthened on the back of the news and it is showing no signs of slowing down just yet. Incredibly, GBP v EUR is almost back to the level it started the month before the stock market sell-off and the GBP v USD continues to power onto fresh 2-year highs.

The UK offers nothing of note this week and so the Pound would hope to secure the recent gains and at least consolidate at the current levels. £-€ has gained 2% in 3-weeks and £-$ 4%. This is significant ground in not a lot of time, which suggests an overbought territory has been reached.

Therefore, we can expect to see some weakness this week for GBP especially as it's month-end (traders closing positions for profit). Or, the good times could simply continue and new heights could be about to be reached..


EUR
For the third week in a row, the single currency has incredibly performed the exact same way. It has gained impressively versus the USD, but lost ground again impressively against GBP. Noticeably though this time round, last week the Euro-Zone's PMI data lagged behind that of the UK, which is a trend to follow for the upcoming months.

All eyes on German economic news and the Euro-Zone's inflation report this week.. 


USD
As explained last week, the Jackson Hole event had the potential of being a huge market mover and it didn't disappoint. The poor USD was once again sold-off and for good reason this time. Fed Chair Powell noted in his speech that he was 'confident inflation would not make a surprising return' and that he was 'now much more focused on the cooling labour conditions'. 

"The time has come for policy to adjust" was the nail in the coffin for the Dollar and almost a cast iron guarantee that the US will see an interest rate cut next month. The question is by how much..