The greenback is set to trim a 4-day gain as US 10-year yields edge lower ahead of the US non-farm payroll data, but still headed for its third weekly gain. USD/JPY consolidates mid 142-143 and AUD/USD starts to move back to 0.66 as the Reserve Bank of Australia indicated that inflation could stay higher for longer. GBP/USD advances this morning and trades above 1.27.
The Bank of England raised interest rates by another quarter point on their 3rd of August meeting. The Monetary Policy Committee raised the benchmark rate to 5.25%, in line with consensus, and the vote split was 2-6-1, with Catherine Mann and Jonathan Haskel suggesting a 50bps rate hike, and Swati Dhingra opting for no increase. The decision to downshift the pace of the tightening campaign comes in line with the small improvement in inflation in June, but also leaves the message that there is still some work to do around monetary policy before the central bank comfortably decides to pause.
It is jobs day in the US, and it can create some turbulence in US Treasuries. Non-Farm Payrolls are estimated at 200,000 in July, moderating slightly, and the rise in average earnings is also expected to slow down to 4.2% YoY. A strong report above estimates can build up bets that the Fed will continue to tighten credit conditions, with rates potentially peaking at 6%.
