- GBP/USD climbs as the US Dollar weakens despite stronger US Retail Sales and Industrial Production.
- Markets price 25-bps Fed cut, with minority eyeing 50-bps; FOMC projections and dot plot in focus.
- UK payrolls fall for the seventh month, but BoE is expected to hold rates steady at upcoming meeting.
The Pound Sterling (GBP) advances over 0.30% as the Greenback drops to a ten-week low, according to the US Dollar Index (DXY). The two-day meeting by the Federal Open Market Committee (FOMC) begins on Tuesday, at which the Fed is expected to reduce interest rates. GBP/USD trades at 1.3646, up from 1.3592 daily low.
Sterling rallies to 11-week high as traders shrug off strong US Retail Sales, focus shifts to Fed cut
Sterling is trading at eleven-week highs versus the US Dollar, which failed to appreciate as Retail Sales data unexpectedly rose above estimates in August, reported the US Commerce Department on Tuesday. Retail Sales rose by 0.6% MoM in August, the same growth as the previous month and exceeding forecasts of 0.2%. Sales for the Control Group, used to calculate Gross Domestic Product (GDP) figures, expanded by 0.7% MoM, up from July’s print of 0.5%.
Although the data was solid, this would not prevent the Fed from easing policy as the labor market continues to deteriorate. Meanwhile, US Industrial Production rose by 0.1% MoM in August, exceeding July’s -0.1% MoM contraction.
Across the pond, UK jobs data showed that payrolls fell for a seventh straight month, showing that the labor market is cooling, though it might not deter the Bank of England (BoE) from keeping rates unchanged at Thursday’s monetary policy meeting.
Traders’ focus shifts to the Fed’s decision on Wednesday. Market participants had fully priced in a quarter of a percentage point cut, though a tiny minority eyes a 50-bps rate cut. In addition to the decision, Fed officials will update their economic projections and lay the path for interest rates moving forward for the remainder of the year.
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