Daily digest market movers: Pound Sterling hovers around two-month high at 1.2800
- The Pound Sterling trades broadly steady near 1.2800 against the US Dollar as the global rate-cut cycle picks up pace after the Bank of Canada (BoC) announced on Wednesday an interest-rate cut, becoming the first G7 central bank to do so in the current cycle. The BoC reduced interest rates by 25 basis points (bps) as expected. Also, the European Central Bank (ECB) is widely anticipated to reduce its Deposit Facility Rate by 25 bps in Thursday’s late European session. The Bank of England (BoE) and the Fed are expected to follow suit later this year.
- The Fed is expected to start lowering its key borrowing rates from the September meeting. However, expectations could shift significantly once the US Nonfarm Payrolls (NFP) report for May is published on Friday.
- The US NFP is estimated to report that hiring remained robust in May, with employers adding 185K payrolls, higher than the prior release of 175K. The Unemployment Rate is expected to remain steady at 3.9%.
- Investors will also focus on the Average Hourly Earnings data, which gauges wage growth and has remained a major barrier to progress in the disinflation process. Annual Average Hourly Earnings are forecasted to have grown steadily by 3.9%, while on a monthly basis wages are expected to have grown 0.3%, higher than the prior reading of 0.2%. Higher-than-expected payrolls and wage growth would force traders to push back Fed rate-cut bets while soft numbers will do the opposite.
- On the other side of the Atlantic, the United Kingdom’s (UK) economic calendar has nothing much to offer this week. But next week, investors will look into Employment data for the February-April period and the monthly Gross Domestic Product (GDP) data for April. These economic data will significantly impact market expectations for Bank of England (BoE) rate cuts. Currently, investors expect that the BoE will deliver two rate cuts this year and will initiate the policy-easing cycle from the August meeting.
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