Yesterday, GBP took a hit as three members of the Bank of England (BoE) advocated for a rate cut at bank's meting, and highlighting their worries about the economic landscape and employment sector.
The bank did hold rates this time but the dovish voting saw markets sell off GBP with a drop in gilt yields. Furthermore, several investment banks are starting to form the opinion that perhaps markets are underpricing the amount of rate cuts expected by the BoE next year (currently at 55bps) and are actually expecting a 100bps worth of cuts to begin in February.
Upward revisions on US GDP continued USD gains from Wednesday's Federal Reserve (Fed) meeting, with the USD index remaining near 2-year highs.
*Daily move - against G10 rates at 7:30am, 20.12.24
** Indicative rates - interbank rates at 7:30am, 20.12.24
GBP losses are continuing this morning following lower than expected retail sales once again and spelling out growth risks for the UK economy, suggesting the stellar year that GBP has had may well not be replicated in 2025.
President-elect Trump reminded Europe that they need to make up their tremendous deficit with the US by making large purchases of US oil and gas, otherwise it's tariffs all the way.
For the rest of the day, we have core PCE inflation numbers from the US in the afternoon. Any upside surprises will back the hawkish message the Fed put out on Wednesday evening and add to USD gains.
Also this will be the last market report of 2024. Thank you ever so much for your continued readership and support over the last year.
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