GBP slumps ahead of Governor Bailey and Reeves’ speeches

GBP: The Pound has slumped to its lowest level against the Euro since November 2023 this morning, despite Trump’s 30% tariff threat on the EU - GBP/EUR at 1.1500 after starting the year nearer 1.2000

The Pound is under pressure on mounting concerns about a faster pace of UK interest rate cuts driven by a cooling job market and timid growth prospects. The Bank of England Governor Andrew Bailey told The Times yesterday that more aggressive rate cuts could be possible if the jobs market slows too quickly.

Markets have priced in a rate cut announcement when the BoE next meet on 7 August. The debate does not seem to be as to whether they will announce a cut but rather, whether they will stick to their ‘slowly, slowly’ 0.25% cuts or go for the bazooka with a 0.5% cut.

GBP/EUR at 1.1500
GBP/USD at 1.3450
With Inflation data published tomorrow, we have important payroll data in the UK on Thursday which will be closely watched

USD: June’s inflation data (this evening) will significantly impact the direction of the US Dollar as it is a key indicator for the Fed’s interest-rate path ahead. Markets currently pricing in 0.5% total cuts in the US during 2025.

The US Consumer Price Index is set to rise 2.7% YoY in June, accelerating from May’s 2.4% growth. Markets still need to digest a slew of fresh tariff threats by President Trump so far this month.

Over the weekend, Trump threatened a 30% tariff on imports from the European Union (EU) and Mexico, starting on August 1, having sent tariff letters to about 20 other countries last week.

Meanwhile, Trump is piling up political pressure for more aggressive stimulus from the US central bank, undermining its independence. The President continued to bash Fed Chair Jerome Powell by saying on Sunday that “it would be a great thing if Powell stepped down.”

EURO:  The shared currency continues to gain ground USD losses, and some decent data, taking EUR/USD up to 1.1700.

Very strong German confidence data and Eurozone manufacturing data published this morning will maintain this strength in the medium term.

China: Asian stocks rose overnight after strong data from Chinese GDP came in better than expected, at 5.2% in the second quarter. Coming after a raft of weak data, a looming property market slump and the impact of tariffs, this is a welcome rebound in data.

This week’s data:

Tuesday
US: Fed Speeches, Inflation data
Canada: Inflation data
UK: Central Bankers and Chancellor’s speeches

Wednesday:
GBP: Inflation data
US: Producer prices data / Fed speeches

Thursday:
AUD: Employment data
UK: Payroll and employment data
US: Retail Sales

Friday:
USA: Confidence data