BoE Decision in Focus as Pound and Dollar Slips
GBP
The pound has slipped against the Dollar and Euro with the Bank of England interest rate meeting this Thursday.
Traders are almost fully pricing in a 25 basis points (bps) interest rate reduction by the BoE this week, according to a report from Reuters. The BoE is seen performing a delicate balancing act while guiding the interest rate outlook amid escalating price pressures and cooling labour market conditions.
Employment data for the three-months ending May and the Consumer Price Index (CPI) data for June showed a slower hiring trend and a higher-than-expected increase in headline and core inflation
The UK government borrowed more than expected in June, fuelling speculation that Chancellor Rachel Reeves may be forced to raise taxes in the autumn budget to stabilise the public finances. Public sector net borrowing rose to £20.7bn—an increase of £6.6bn compared to the same month last year—marking the second-highest June borrowing figure since records began in 1993.
No significant events are scheduled for today
EUR
EUR/USD is higher this morning.
In the Eurozone, steady growth in preliminary Harmonized Index of Consumer Prices (HICP) data for July has dampened expectations of further near-term interest rate cuts by the ECB. Friday’s figures showed headline inflation rising 2.0% year-on-year, with core inflation at 2.2%—slightly above forecasts.
Furthermore, ECB President Lagarde stressed that no changes to interest rates would occur until inflation shows sustained convergence toward target. This keeps cuts off the table for now, with the euro highly dependent on future data.
Moreover, geopolitical tensions emerged as France accused China of unfair practices in the solar sector—an issue likely to escalate at Thursday’s EU-China trade talks. Escalation could hurt business sentiment across the bloc.
No significant events are scheduled for today
USD
The dollar index which measures the U.S. dollar against a basket of six major currencies climbed to a two-month high near 99, fuelled by strong fundamentals and global uncertainty.
July’s jobs data showed 245,000 new jobs vs. 200,000 expected, though last Friday’s softer figure (73,000 vs. 106,000) hints at seasonal slowdown.
U.S. President Donald Trump responded to the disappointing payrolls data by dismissing Bureau of Labor Statistics Commissioner Erika McEntarfer, alleging—without evidence—that she had manipulated the jobs figures.
Fed Chair Jerome Powell has maintained a cautiously optimistic tone, affirming that decisions remain data driven. Markets interpreted this as a signal for rates to stay steady in the near term.
Furthermore, manufacturing PMI beat expectations, but other indicators like ISM services and Michigan consumer sentiment were weaker.
No significant events are scheduled for today
CAD
USD/CAD has declined slightly following weaker economic data.
Last week, Monthly GDP came in at just 0.1% (vs. 0.3% expected), and the manufacturing PMI stayed in contraction at 48.9 for a fourth straight month.
This dampens expectations for a BoC rate hike in September. Governor Macklem recently described current policy as “appropriate,” given moderating inflation and slower growth.
Furthermore, Canada expressed concern over renewed U.S. tariffs but remained hopeful that a deal could still be reached to reduce the tariff rates. This optimism comes despite the Trump administration’s denial that the elevated levies imposed on U.S. trading partners are open to negotiation. President Trump and Canadian Prime Minister Mark Carney are expected to speak in the coming days.
Oil prices have continued to decline with Brent crude and West Texas intermediate crude both below $70.
No significant events are scheduled for today
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