BoE Cuts, Sterling Sinks, Dollar Defies Data Releases.

Following the Bank of England starting their rate cutting cycle and the disappointing data out of the US, we have seen markets yet again repricing, with the Pound taking the brunt of it.

Although the cut was expected, the vote to hold or cut was incredibly close. Pairing that with lingering uncertainty in the lead-up to the announcement (due to the comments made in the weeks and months prior), we saw a sell-off in the Pound, mainly due to profit-taking and position adjustments by major banks and investors. Some reports show that the Pound has possibly been oversold and will again find traction, although clawing back the gains seen in July may be a big ask.

Moving forward, the Bank of England will make their next decision cautiously and will be very much data dependent, essentially a balancing act between making the right call for the economy while also keeping the Sterling attractive enough to Investors. If they get it right, we could see a bounce back in the Pound, with some predictions seeing 1.17 or above as a comfortable place for the Pound to take refuge.

The question remains, when will the selling end?

The US saw poor data across the board on Friday with a focus on Non-Farm Payroll undershooting by some margin compared to what was originally forecast. Looking back historically, this is only the 5th time it has come out below expectations in nearly 2 years, sparking yet more questions. On the release, we saw a sharp move higher which hasn’t lasted and the Dollar has now exploited the Pound's newfound weakness and pulled back its losses seen last month.

All eyes now will be firmly focused on how the Federal Reserve react to their rate cutting plans.

Looking at the week ahead, it is very light on the data front so any significant moves could be sparked from political news or comments made on the economic outlook.

Overall the Pound has lost over 2 cents since Thursday across the majors but gained on some commodity currencies.

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