With the latest stance from different central banks to slow down the tightening of monetary actions (pause or less interest rate hikes). There was no surprise yesterday when BoE raised interest rates by 25 basis points compared to its latest meeting in June of 50.
We did see a drop off for the GBP during the day but majority of its losses has been recovered. Seeing GBP/EUR around the 1.16 market, while GBP/USD is in lower 1.27 mark.
While BoE halved their rate hike compared to its last meeting, the comments, votes and forecast wasn’t as dovish as market had speculated. In the press conference afterwards they stated that at least one more rate hike is required in 2023 to combat down inflation levels. Two members from BoE initiated that 50 basis points would have been needed in August. A forecast for 2025, suggested that inflation will be higher than what was forecasted back in May, injecting further market speculation that there is more room for higher interest rates – which would benefit GBP.
All these reports has stabilised the GBP to major currency pairs and created resistant levels. In comparison to the Federal Reserve and the European Central Bank who have stated that their upcoming decisions are data driven. It’s suggested that BoE have a more modest stance to upcoming interest decision, after strong labour data and earnings. Leaving the UK in a better position to handle further injections to interest rates.
For today, as it’s the first Friday of the month, we have non-farm payroll from the US being released in the afternoon. Expectations is that it should fall off slightly from its previous month, hence in mind that there is very difficult to predict this accurate. Looking back to Wednesday and private labour figures that was forecasted to create an additional 189k jobs actually came out at 324k. Meaning that there is room for a lot of volatility later on in the afternoon session. Any numbers that’s well below or above expectations, will create movement on USD currency pairs.
