Bank of England Decision in Focus After Weak US Jobs Data.
Foreign exchange markets are starting the week digesting last Friday's much weaker-than-expected US employment report, which has intensified bets on a near-term Federal Reserve interest rate cut and sent the US Dollar lower. The soft jobs data capped a pivotal week that also saw the Fed maintain its data-dependent stance. With the US narrative now set, the market's attention pivots this week to the United Kingdom and a critical policy decision from the Bank of England.
The Pound Sterling is the main currency in focus this week, culminating in the Bank of England's interest rate decision on Thursday. After a series of dovish signals from the central bank, market participants are on high alert for a potential rate cut at this meeting. The decision, the vote split, and the subsequent press conference will be the primary drivers for the Pound this week.
The US Dollar begins the week on the back foot, under significant pressure following the soft Non-Farm Payrolls report. The data provided the clearest evidence yet of a cooling US labour market, solidifying expectations that the Federal Reserve will begin its easing cycle in September. The US economic calendar is very light this week, leaving the Dollar likely to trade on broader sentiment and the fallout from events in other regions.
The Euro is trading with a firmer tone, benefiting from the widespread US Dollar weakness. Last week's Eurozone inflation figures were stable, keeping the European Central Bank on a gradual and predictable path of policy easing. With a quiet regional calendar, the Euro's direction will also be heavily influenced by the outcome of the Bank of England's decision and its impact on the wider European currency complex.
Events to Watch This Week:
⦁ Wednesday, August 6: German Industrial Production
⦁ Thursday, August 7: Bank of England (BoE) Interest Rate Decision & Press Conference
⦁ Friday, August 8: Canadian Labour Force Survey
The market dynamic has shifted decisively following the US jobs report. The key question for this week is whether the Bank of England will join other central banks in cutting interest rates. The BoE's decision on Thursday is this week’s headline event and is set to create significant volatility for the Pound, with potential knock-on effects for other European currencies.
