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GBP/USD
Source: Newsmaker23
The British pound traded higher on Friday, while the euro also posted modest gains as the US Dollar weakened broadly following dovish remarks from Federal Reserve Governor Christopher Waller. His comments reduced expectations for a September rate hike, helping GBP/USD rise to around 1.3545, up 0.15%, while EUR/USD edged higher to 1.1628.
Market participants are increasingly expecting any potential Fed tightening cycle to be limited. Chris Turner, Global Head of Markets and Regional Head of Research for the UK and CEE at ING, said investors appear to believe that even if the Fed raises rates again, the tightening cycle is unlikely to be aggressive enough to significantly disrupt the broader investment environment. This view creates a mildly negative backdrop for the Dollar in the near term.
Waller’s remarks on Thursday were more dovish than markets had anticipated. His comments shifted the focus toward August inflation data, which would need to come in significantly hotter to justify a rate increase. This contrasted with the more hawkish tone delivered by Fed Chair Kevin Warsh a week earlier. Short-dated US Treasury yields fell by around 5 basis points, while market pricing now places the probability of a September Fed rate hike at roughly 50%.
Attention now turns to the US Non-Farm Payrolls report, with consensus expectations pointing to an increase of around 55,000 jobs, while unofficial market estimates are closer to 30,000. The unemployment rate is expected to remain at 4.1%. ING believes the longer-lasting market impact is likely to come from inflation data rather than labor figures, while its base case still calls for a 25-basis-point Fed rate hike.
In the UK, Sterling’s gains are not being driven by particularly strong domestic fundamentals. EUR/GBP remains in consolidation after breaking above 0.86 in the previous session, a move linked to the recent sell-off in UK government bonds, or gilts, as well as concerns over strained public finances. New Chancellor John Healey is expected to deliver his first major political speech early next week, with fiscal responsibility likely to be a key focus.
Friday’s attention will also be on Bank of England policy signals. The BoE’s Decision Maker Panel survey is due, while Governor Andrew Bailey is scheduled to speak. ING said it remains too early to declare inflation risks fully under control, with UK money markets still pricing in up to around 60 basis points of additional BoE tightening.(mrv)
Source : Newsmaker.id