• The market is already anticipating a Federal Reserve rate cut this week.

• Expectations are that the Bank of England will keep its rates unchanged.

• The recent decision by the European Central Bank to maintain interest rates is bolstering the euro’s strength.

What Moved the Markets Last Week?

The British Pound has struggled to gain traction. The latest economic data confirmed what many suspected: the UK economy is stagnating. A lack of GDP growth and contracting production figures painted a picture of a slowing economy.

Meanwhile, the U.S. Dollar softened as a cooling labour market and a dip in consumer confidence bolstered the argument for the Federal Reserve to begin cutting rates. This has led to an increase in expectations for a policy shift in the near future.

Finally, the Euro has proven to be surprisingly resilient. The currency’s stability is a direct result of the European Central Bank holding firm on interest rates. This decision has given the euro a boost, even in the face of political uncertainty from France.

A Quiet Start to a Busy Week

The week is kicking off with a subdued tone, as today’s calendar is light on major economic releases. However, this calm is the precursor to a high-stakes week for global finance, with a series of crucial central bank meetings on the agenda.

Key Decisions Ahead:

• Rate Cuts Expected: Analysts widely anticipate that both the U.S. Federal Reserve and the Bank of Canada will cut their interest rates by a quarter-point (0.25%). This would be a significant step in their policy direction.
• Decisions from the UK and Japan: We are also awaiting interest rate decisions from the Bank of England and the Bank of Japan, which will provide further clarity on their economic strategies.

What This Means for the Pound (GBP):

The pound is currently experiencing a period of volatility. Against the U.S. dollar, it’s testing a key resistance level—a high not seen since early July. This is happening against a backdrop of domestic political uncertainty, including a recent high-profile change in the UK’s diplomatic representation to the U.S. and a scheduled visit from Donald Trump.

Data to Track This Week:

• UK: Watch for Tuesday’s Average Earnings data and Wednesday’s Consumer Price Index (CPI) figures, which will give a fresh look at inflation and wage growth.

• North America: Canada’s CPI and U.S. retail sales figures are also due out on Tuesday, offering key insights into consumer behaviour and inflation in their respective economies.

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