GBPEUR hit its highest levels since April 2022 on rising bets that, over the course of 2025, the Bank of England (BoE) will cut interest rates less aggressively than the European Central Bank (ECB). The move comes ahead of the ECB meeting on Thursday where markets are currently expecting a rate cut of only 25bps.
Following the dovish Reserve Bank of Australia meeting earlier in the day, GBPAUD pushed on higher as well.
Supported by higher treasury yields and ahead of today's CPI numbers, USD gains continued for the third consecutive day.
*Daily move - against G10 rates at 7:30am, 11.12.24
** Indicative rates - interbank rates at 7:30am, 11.12.24
The release of the US CPI figures is the key event today. The main takeaway will be whether we see any upside surprises to indicate raising inflationary pressures. This will be the last CPI print prior to next week's Federal Reserve (Fed) meeting. Markets are currently pricing in an 85% chance of a 25bps cut. Any upside surprise will likely reduce these odds and will be USD positive.
What could also help the USD cause would be the Bank of Canada opting for the more conservative rate cut of 25bps versus the market's current expectations of a 50bps rate cut. A 25bps cut could well see markets price in a higher probability of no cut by the Fed next week.
GBPEUR is holding onto yesterday's gains and, ahead of tomorrow's ECB meeting, we remain open to the potential of revisiting the highs of March 2022.
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