During Powell’s speech on Friday, he suggested that the US central bank is likely to reduce interest rates in September. He stated: “The time has come for policy to adjust”. He added the direction of travel is clear, but the details of the timing and pace of cut rates will depend on a number of factors, including incoming data, evolving outlook, and balance of risks.
Key data this week includes Nvidia earnings and US core PCE.
Overnight EURUSD reached the strong resistance level of 1.12, consolidating around 1.1170.
Europe key data includes Eurozone Harmonised Index of Consumer Prices (HICP) this Friday. It will likely show headline inflation slowing sharply, coming down to ECB’s 2% target. Prior is 2.6% versus 2.2% estimates. Core inflation will only fall slightly, adjusting from 2.9% to 2.8%. Movement towards 2% target will support action for a new rate cut in September.
Markets have yet to fully react to BoE Governor Andrew Bailey’s speech at Jackson Hole, where he showed concern over “intrinsic” inflation and felt economic costs of tighter policy have lessened. This may lead to a shallower and slower easing cycle for the BoE.
GBPUSD rose 0.1% to 1.3201 after hitting a 2.5 year high of 1.3231 on Monday.
EURGBP fell overnight by 0.1% to 0.8460.
This Friday UK Nationwide House Price Survey will be released. Previously 2.1%, estimated to be 2.9%. House price recovery will improve following BoE’s decision to start the easing cycling in August. However, gains will be limited due to stretched affordability and limited household buying power.
