GBP up as Bailey discounts chances of a rate cut this year

Good morning

We’ve had a bit of a change in the markets.  GBP is up above 1.3300 against USD, now 1.3320, but EUR has lagged, still around 1.1400 which puts GBPEUR at 1.1685, its highest level for over a year having finally broken above that 1.1600/20 area that capped the upside for so long.  Perhaps Bailey’s comments yesterday that rate cuts are off the table for the time being was enough to give GBP a bit of a boost.  

We’ve also seen a sharp move lower in USDJPY this morning, the pair had drifted from overnight levels around 162.50 to 162.20, then dropped to 161.15 in a matter of minutes.  While the move may have looked like intervention, it wasn’t particularly big in the scheme of things and as i type the pair is back up to 161.75.  Whether it was official action or not remains to be seen but it will put traders on alert ahead of the US holidays, I’ve warned several times this week that Japan may take advantage of reduced liquidity ahead of the US holidays.  The USD selling saw GBPUSD and EURUSD spike briefly as well.

Feds Warsh gave little away in comments yesterday, but made it clear once again that we shouldn’t expect anything in the way of forward guidance when it comes to Fed policy under his leadership. He didn’t really move away from his hawkish tones from the last FOMC meeting, there are still some thinking we’ll have a Fed rate rise sometime this year.  Meanwhile in the US, the USMCA, the trade deal between US, Mexico and Canada, looks like it won’t be renewed without further negotiations. 

I had a quick look at a summary of Trump’s financial disclosures.  He made some $1bn or so from crypto business dealings in the last year, a good chunk from a company run by his own sons.  Trump insists he isn’t benefitting from being President and sees no conflict of interest but his earnings for 2025 of $2.2bn eclipse those of 2024.  Trump claims he doesn’t manage his own investments and says everyone else has made money in equities over the last year but it is impossible to think his Presidency has no impact on his ability to make money.  Still, you never see a poor President, indeed you never see a poor Senator. 

In sport, England made it through to the next round of the world cup with a win over Doctor Congo, two late goals from Harry Kane spared England from an embarrassing defeat after Congo took an early lead.  England will now face Mexico in the early hours of Monday morning, to be played in Mexico at their stadium which is some 7,000 feet above sea level.  Plenty is being made of the fact Mexico have lost just two home matches out of 89 played, the most recent being a loss in September 2013.  Despite this, and despite a few underwhelming England performances, we are still favourites to win the match.  It won’t be easy!

US nonfarms is the main event on the calendar today, coming ahead of the US holiday tomorrow.  Headline expected to be just over +100k, down from last month’s +172k, a figure which surprised to the upside and sent USD marching higher.  GBPUSD and EURUSD both lost around 150 pips on last month’s release.  With Fed looking a little more hawkish already I’m thinking that a stronger nonfarm headline this time may have less impact. 

Have a great day, and to our US readers, have a great long weekend…

-  10.00 EU unemployment

-  11.00 ECBs Elderson speaks

-  13.30 US nonfarm payrolls

-  14.30 CAD S&P manufacturing PMI

-  14.45 Feds Daly speaks

-  14.45 ECBs Escriva speaks

-  15.00 BoEs Mann speaks

-  15.00 US factory orders

-  18.55 ECBs Cipollone speaks

-  00.00 AUS S&P services PMI