Markets Brace for Fed Decision & US Jobs Report.
Foreign exchange markets are poised for a highly significant week, with a monetary policy decision from the US Federal Reserve and the monthly US employment report set to dominate the agenda. Last week's US GDP figures showed the economy slowed in the second quarter, largely meeting expectations and keeping the door open for future interest rate cuts. This week’s top-tier events will be critical in shaping the market’s view on the timing of those potential cuts and will likely drive significant volatility.
The Pound Sterling enters the week ahead of its own key central bank decision next week. With last week's data showing a mixed picture, the market remains divided on whether the Bank of England will cut rates at its August meeting. This week, final manufacturing and services data will be monitored, but the Pound will likely be most influenced by the major risk events unfolding in the US and the resulting shifts in the US Dollar.
The US Dollar's direction this week will be dictated by two main events. First, the Federal Reserve concludes its policy meeting on Wednesday. While no change in interest rates is expected, the accompanying statement and press conference will be scrutinized for any change in tone following the recent slate of softer economic data. This will be followed by the influential Non-Farm Payrolls report on Friday, which will provide a vital snapshot of the US labour market's health.
The Euro continues to trade with a close eye on relative central bank policy. The European Central Bank is widely seen as being ahead of the Federal Reserve in its easing cycle, a dynamic that has influenced the single currency. Preliminary inflation figures from the Eurozone this week will be important, as they could affect the outlook for the ECB's future policy path, especially when viewed against the backdrop of the Fed's decision.
Events to Watch This Week:
⦁ Wednesday, July 30: US Federal Reserve (FOMC) Policy Decision & Press Conference
⦁Thursday, July 31: Eurozone Preliminary CPI (Inflation for July) & US Initial Jobless Claims
⦁Friday, August 1: US Non-Farm Payrolls Report (for July)
This week is set to be a landmark period for currency markets. The combination of a Federal Reserve policy decision and the critical US employment report has the capacity to set the trading tone for the month of August. Investors will be closely monitoring these events for any surprises that could prompt a significant reassessment of the outlook for US monetary policy.
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