July 25, 2024
New Delhi, India
GBP/USD
The Pound Sterling (GBP) weakened to 1.2880 against the US Dollar (USD) during Thursday’s London session. The decline in the GBP/USD pair comes amidst sour market sentiment ahead of the advanced United States (US) Q2 Gross Domestic Product (GDP) data, which is set to be published at 12:30 GMT.
Market Overview:
- S&P 500 Futures: Posted gains in European trading hours, following a 2.31% drop on Wednesday.
- US Dollar Index (DXY): Exhibits sluggish performance, hovering around 104.30.
Pound Sterling Performance: The Pound Sterling showed a poor performance against major peers, except for the Australian Dollar (AUD) and the New Zealand Dollar (NZD), on Thursday. The British currency faced significant pressure as market experts anticipate the Bank of England (BoE) pivoting to policy normalization in August.
BoE Rate Cut Speculation:
- A Reuters poll conducted between July 18-24 showed that over 80% of economists expect the BoE to reduce its key borrowing rates by 25 basis points (bps) to 5% in the August meeting. This is a decrease from June’s poll, where 97% of respondents favored a rate cut.
- Market participants are only pricing in a 45% chance of rate cuts in August, reflecting the absence of BoE officials’ endorsement for rate cuts.
UK Inflation and Economic Outlook:
- The UK’s annual headline inflation has returned to the central bank’s desired rate of 2%.
- Policymakers remain hesitant to authenticate rate-cut expectations due to persistent wage growth, which fuels inflationary pressures in the service sector.
Economic Data:
- The preliminary UK S&P Global/CIPS report for July indicated a firm start to the third quarter.
- Composite PMI: Came in higher at 52.7, compared to estimates of 52.6 and the previous release of 52.3.
- Manufacturing PMI: Expanded to 51.8, outperforming the previous release.
- Services PMI: Increased to 52.4, also surpassing prior data.
As the market awaits the advanced US Q2 GDP data, the performance of the Pound Sterling remains under close watch, with investors keenly observing any indications from the BoE on future rate cuts and economic policy direction.
Disclaimer:
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