By Ashley Finill
Yesterday afternoon the Pound moved into new territory against the US Dollar, as it nudged up to a 12-month high. Sterling has now gained over 3 cents on the greenback in just under 2 weeks, which presents a great buying opportunity for those who have a USD requirement. With a relatively quiet week on the data front, the gains made for Sterling are almost certainly sentiment driven, as there is a strong feeling that a US interest rate cut is on the cards at their next meeting on September 18th. Out of the 3 major banks, the FED are the only one yet to make the jump to cut interest rates. The first to take the plunge was the ECB in April, which gave way to 2-year highs on GBP > EUR, however those highs were short lived, as 3 months later the Bank of England cut rates and with that came over a 2 cent drop against the Euro, wiping out the gains that had been made. That being said; Sterling over the past couple of weeks has started to recover against the Euro, but more stabilising rather than gaining back any ground. So, it’s over to the FED and this week is a key week as central bankers all meet this Thursday through to Sunday at the annual Jackson Hole Economic Policy Symposium. FED Chairman Jerome Powell is expected to give more insight on whether they will cut at the next meeting. Bank of England Governor Andrew Bailey is also attending and is likely to speak about further cuts in the UK, as will Christine Lagarde for the ECB.
Biden Steps Aside
In other news this week, which will ultimately start effecting the currency markets later this year, is the US election, with Joe Biden stepped aside from the rallying handing the reins to the Kamala Harris, who hopes to move into the White House after November the 5th. The person standing in her way is ex-President Donald Trump, who is vying for a 2nd term in what the polls suggest is a very tight race, with Harris just ahead with a mere 2 point lead. As the election draws closer, uncertainty will start to take hold, which will almost certainly create more volatility in an already volatile currency market, with politics and economic data taking hold in 2024.
Data remaining this week
As noted already, this week is fairly quiet on the data front, with the market being mostly sentiment driven. That being said, there are still a couple of releases to be aware of that may have an impact on the currency market. Tonight at 6pm, the FOMC minutes in the US will be released. The minutes describe the views expressed by policymakers on their monetary policy stance and explain the reasons for the Committee’s decisions, and can give an insight on potential decisions ahead of their next meeting. Analysts study the minutes to determine if the committee members are taking a hawkish or dovish tone in their remarks – which way that is interpreted will drive how the currency market reacts. Thursday is a busier day for data; at 9am and 9.30am both the EU & the UK respectively release PMI data, which could shake up the markets early doors. At 2pm the EU also post Consumer Confidence, which is expected to come in better than last month’s figure of -13. Over stateside, the US also release PMI data at 2.45pm. Onto Friday, retails sales will be announced in Canada at 1.30pm. Across the rest of the afternoon, there are speeches at the Jackson Hole meeting by both FED Chair Jerome Powell & Bank of England Governor Andrew Bailey – if interest rate cuts are discussed, then we could see some market movement to close out the week.