The Euro has started this morning on the backfoot against it’s major currency pairs, as The Eurozone’s Consumer Confidence for July narrowly beat expectations to rise from -14.0 to -13.0. This was the highest reading since February 2022, however with it still being in negative territory there is still some way to go to move into positive numbers. On the other side, The Pound has also been restricted as a lack of economic data from the calendar has left Sterling struggling to gain on recent strengths. Also undermining Sterling was a rise in speculation of an interest cut by the Bank of England.
The central bank meet next week to deliver its decision, and current odds surrounding the exact timing and weight of cut have risen from 40% to 50% due to a mixed bag of economic releases earlier in the month. The main mix was seen with Inflation being hotter than expected, coupled with stubborn wage growth in May. But of more concern was The UK Retail Sales report which left much to desire, again relying on June’s Euro 2024 ventures to prop the figures back up.
Keeping with Central Banks, we have The Bank of Canada’s interest rate decision this afternoon. The cut is expected to be 25 basis points, from 4.75% to 4.50% and will be a second consecutive rate cut for the central bank. Last month, The Bank of Canada delivered it’s first rate cut since a series of hikes which began back in March 2022. Governor Tiff Macklem stated that it is reasonable to expect more rate cuts further down the line if inflation continues to ease naturally. Since those comments, inflation has cooled further with headline inflation only rising to 2.7% instead of the 2.9% forecasted. This rate cut is pretty much fully priced in and so we don’t expect as much volatility for Canadian Dollar exchange pairs, however comments surrounding future cuts could bring some volatility.