Daily currency update
The US Dollar remains a central focus. While it’s generally strong, the market is awaiting the outcome of today’s Federal Open Market Committee (FOMC) meeting. The Federal Bank is widely expected to keep the federal funds rate unchanged later today. The market seems to have priced this in, so any surprise here would cause a major shock.
Pound rebounds but remains vulnerable, it is showing some signs of a rebound, particularly against the Euro, but it remains at a low level against the US Dollar. The upcoming Bank of England meeting on August 7th is a key factor, with a potential rate cut putting continued pressure on the currency.
The Euro has seen some recent weakness, with the EUR/USD pair in a volatile state. There are still doubts about the recent EU-US trade deal and its long-term impact, this morning the Gross Domestic Product for quarter on quarter and year on year data is due to come out both are due to come out lower than previous which can cause an upset for the Euro.
Key movers
Overnight, new Australian inflation data for the June quarter came in at an annualized 2.1%, which was below market expectations. This has led to a widespread expectation that the Reserve Bank of Australia (RBA) will cut its cash rate by 25 basis points at its August meeting, a move that would weaken the AUD.
The market is now almost certain of an RBA rate cut. This divergence in monetary policy expectations (with the RBA cutting and the Bank of England potentially doing the same but still having a higher overall rate) will be the primary driver for this pair. The GBP/ AUD pair may see further strength as a result of a weaker AUD.
Expected Ranges
GBP/USD: 1.3350 – 1.34 ↑
GBP/EUR: 1.1545 – 1.1580 ↑
EUR/USD: 1.1555 – 1.16 ↑
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