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ECB could cut interest rates by September

GBP

GBP starts today around the 1.2580 but remains in a range, 30pips either side of this figure. It also continues to be hampered by concerns over the growth outlook following the weak PMI data releases this week. There was also further speculation that the Bank of England would adopt a more dovish policy stance over the next few months. In relative global terms, however, the central bank stance is likely to be slightly restrictive, especially with expectations that the Federal Reserve and European Central Bank will cut interest rates during the third quarter. Sterling will also gain some support if there are increased hopes that global monetary policy actions support the global growth outlook.

USD

Very quiet on the dollar development front given the US market holiday yesterday. The Euro was unable to regain 1.1300 and has been consolidating around 1.1280 ahead of the US data release later today. Markets are expecting an increase in non-farm payrolls of around 160,000 following a 75,000 increase the previous month with unemployment static at 3.6%. Average hourly earnings expectations will also be important with consensus expectations of a 3.2% increase over the year.

EUR

The Euro has consolidated against the Dollar ahead of NonFarm Payrolls and next week's Industrial Production. Markets, yesterday and overnight have left the FX space subdued, but the Euro was a focus considering the doves that are circulating given the constant missing of data expectation figures recently. 

ECB Council Member Rehn stated that the slowdown in no longer temporary. Further monetary stimulus is now needed until there is an improvement in economic conditions and inflation prospects if the central bank is to meet its mandate. Rehn is not one of the most dovish members on the committee and the comments reinforced expectations that the central bank would take further action to cut interest rates by September at the latest if needed.

Today's data:

06:00 EUR Factory Orders s.a. (MoM) (May) 08:00 EUR ECB's De Guindos speech 12:30 USD Nonfarm Payrolls (Jun) 12:30 USD Average Hourly Earnings (YoY) (Jun) 12:30 USD Unemployment Rate (Jun) 12:30 USD Labor Force Participation Rate (Jun) 12:30 USD Average Hourly Earnings (MoM) (Jun) 12:30 CAD Participation Rate (Jun) 12:30 CAD Net Change in Employment (Jun) 12:30 CAD Average Hourly Wages (YoY) (Jun) 12:30 CAD Unemployment Rate (Jun) 14:00 CAD Ivey Purchasing Managers Index (Jun) 14:00 CAD Ivey Purchasing Managers Index s.a (Jun) 15:00 USD Fed Monetary Policy Report

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