- It was a quiet start to the week with many out for the US holiday, however the greenback continues with a slightly bid tone. After falling from its recent highs, EURUSD appears content trading on a 1.09 handle again as markets weigh up rate cuts from both the ECB and Federal Reserve. Fed speak ahead of the next policy meeting continued yesterday with Minneapolis Fed President Neel Kashkari saying that it appears likely that “further modest reductions” in the central bank’s benchmark interest rate will be appropriate in the coming quarters. The recent above expectations inflation report suggests that the Fed will be unlikely to follow with a further 50bp reduction at the next policy meeting and downshift to moves of 25bp in the coming months.
- In positive news for rate setters on the MPC and less so for workers – UK wages grew at the slowest pace in over two years over the summer in a sign of easing inflationary pressures which will likely keep the BoE on course to ease rates again this year. Data released this morning showed that average earnings excluding bonuses rose 4.9% in the three months through August from a year earlier, which was the smallest increase since the second half of 2022. Private sector wage growth also slowed to 4.8% from 5%, with both prints coming broadly inline with expectations. Whilst wage growth remains above the level that the BoE is comfortable with, it is still moving in the right direction as policymakers remain vigilant for any signs of price pressures that could make it harder to keep underlying inflation around the central bank’s 2% target. The attention in the UK now shifts to tomorrow’s CPI report for September which could increase the odds of a November interest rate cut.
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