- The US dollar lost ground yesterday as markets eagerly await the Federal Reserve’s policy decision as rate setters on the FOMC kick off their two-day meeting later today. With analysts still split on a 25bp or 50bp move from the central bank, this afternoon’s Retail Sales report may impact the markets pricing ahead of tomorrow’s announcement. A drop in sales for August is being priced in after a recent drop in auto sales. American consumers continue to be nervous as high interest rates and an uncertain jobs market weigh on their decisions to make large ticket purchases.
- Both the pound and the single currency were able to benefit from a slightly weaker greenback yesterday, with cable rallying through 1.32 and EURUSD consolidating above 1.11. We have the German ZEW survey later this morning, which is the first of the major surveys to be released in the euro area for September. The German economy unexpectedly shrank in the second quarter, despite the expansion in other euro area countries.
- The pound continues to trade well and remains one of the best performing currencies in G10 during 2024. The pair rallied through psychological resistance at 1.32 to trade a whisker below 1.3220, ahead of significant resistance at the late August high around1.3260. This week’s CPI report and BoE decision will be closely monitored and a surprise in tomorrow’s inflation report could see the pound challenging the recent highs.
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