Daily digest market movers: Pound Sterling ahead of busy UK data week
- The Pound Sterling edges higher against the US Dollar (USD) in Monday’s European trading hours. The GBP/USD pair rises gradually due to a steady market sentiment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, continues consolidating above 103.00.
- Current market sentiment exhibits a steady risk appetite; however, volatility is around the corner as the United States (US) CPI data for July is scheduled to be released on Wednesday. The inflation data will significantly influence market expectations for Federal Reserve (Fed) rate cuts this year.
- Economists expect that the monthly headline and core CPI, which excludes volatile food and energy prices, rose by 0.2%. The annual headline and core inflation are expected to have decelerated by 10 bps to 2.9% and 3.2%, respectively.
- According to the CME FedWatch tool, 30-day Federal Funds futures pricing data shows that traders see a 46.5% chance that interest rates will be reduced by 50 basis points (bps) in September. The likelihood of a 50 bp rate reduction has weakened significantly from 85%, recorded a week ago. A significant fall in a short time without the release of any top-tier data suggests that the high probability for big rate cuts prompted by weak US Employment data for July, which bolstered fears of a potential recession, was a mere overreaction.
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