On Wednesday, Federal Reserve Bank of Atlanta President Raphael Bostic stated that it may be “time to move” on rate cuts. Key data from the monthly jobs report and two inflation reports due before the September FOMC meeting will be necessary before he is willing to make any firm decisions.
Bostic said: “If I’m going to err on one side, it’s going to be waiting longer just to make sure that we don’t have that up and down.” This reflects his general view that the Fed would only need to cut rates once this year, likely in the fourth quarter. However, in recent weeks he has shown openness to cut earlier.
This has led to DXY edging 0.1% lower overnight. The Dollar Index is reaching a 13-month low.
EURUSD inched 0.1% to 1.1136 ahead of German inflation data.
The pound fell against the US dollar while edging slightly higher against the euro. GBPUSD fell 0.2% to 1.3241 and EURGBP fell 0.1% to 0.8425.
This is ahead of a speech by BoE rate-setter Catherine Mann in Frankfurt. With Mann being the most hawkish member within the BoE’s MPC, she will likely keep the same viewpoint and stress that core and services inflation is a concern.
UK prime minister Keir Starmer has spent this week building relations with German Chancellor Olaf Scholz in Berlin. His goal for this trip is to join the two nations with a bilateral deal that will cover everything from defence and security to technology and migration. This treaty will come ahead of a planned EU-wide security pact that Starmer wants to implement to improve relations and cooperation for the UK. Although the German treaty will develop over the next few weeks, the wider EU pact will likely begin in Spring 2025.
All this is leading to what Starmer calls a “part of a wider reset grounded in a new spirit of cooperation.” With Starmer meeting French President Emmanuel Macron in Paris today, it’s clear he’s envisioning a future for the UK with closer ties to Europe.
