Investors hope for a rate cut | 16 July 2024

Event to pay attention to today:

15:30 GMT+3. USD - Retail Sales

GBPUSD:

CME's FedWatch tool indicates that the market anticipates a rate cut in September. The probability of a 25-basis point cut to the federal funds rate at the Federal Open Market Committee (FOMC) meeting on 18 September is now 100%.

The release of U.S. retail sales data on Tuesday will complete the recent sequence of significant economic data. It is anticipated that US economic activity will continue to decelerate, with US retail sales in June projected to remain unchanged at 0.0% month-on-month.

Euro traders will be monitoring the outcome of the latest European Central Bank (ECB) meeting on Thursday with great interest. It is anticipated that a further rate cut will be implemented following the quarter-point reduction in June. However, this is not expected to occur until September at the earliest, with the third rate cut until 2024 scheduled for December. As Pimco executive vice president and portfolio manager Constantin Veit observed, the ECB has indicated a preference for making interest rate decisions at forecast meetings, specifically September and December, rather than July, October, or January.

CME's FedWatch tool indicates that the majority of market participants anticipate a rate cut in September. The financial markets have fully priced in the September rate cut, and there is a 100% chance that the Federal Open Market Committee (FOMC) will cut the federal funds rate by at least 25 basis points at its meeting on 18 September.

The latest US retail sales data will be released on Tuesday, marking the conclusion of a series of pivotal data releases over the past week. Market expectations point towards a further moderation in US economic activity. US retail sales are forecast to decline to 0.0% m/m in June.

The latest iteration of the UK Consumer Price Index (CPI) will be released early on Wednesday, with the underlying CPI for June expected to fall to 0.1% from 0.3%. This will be followed by UK labour and wage data on Thursday, while UK retail sales on Friday will round out the GBP's performance on the economic data list.

Trading recommendation: Trading predominantly Buy orders from the current price level.

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