- The UK economy stagnated for a second month, with July’s GDP release coming in unchanged month-on-month with the previous print. The data was a little disappointing with analysts expecting a small increase of 0.2% as declines in production and construction were offset by services and a rebound in retail sales. After outperforming its G10 peers in the first half of the year, growth in the second half of 2024 is expected to be considerably weaker. The data follows yesterday’s labor market stats which showed a jump in employment and suggests a cautious and slow easing cycle from the Bank of England. Markets are currently pricing a 25bp reduction in November, followed by four cuts next year and up to 2 cuts in 2026. The pound has shrugged off the data and continues to consolidate under 1.31, with support seen around 1.3050 and resistance at 1.3150.
- The big mover in the G10 FX space overnight was the Japanese yen which has surged to its highest level in over eight months after hawkish comments from BoJ board member Junko Nakagawa. He said, “I think that the degree of monetary easing will be adjusted if the outlook for Japan’s economy and inflation is realised” adding, “The current level of real rates is extremely low.” The BoJ is expected to leave rates unchanged at its policy meeting next week, however these comments are a reminder that interest rate hikes potentially remain in the pipeline.
- All eyes will be on the US CPI release this afternoon which is expected to underpin a 25bp interest rate cut from the Fed at its policy meeting next week. Former US President Donald Trump and Democrat nominee Kamala Harris sparred through their first TV debate last night with most agreeing that Harris was the victor. The vice President now has the endorsement of Taylor Swift – she clearly sensed the Bad Blood and knew that Trump was trouble when he walked in.
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