Key Headline:

US payroll is a key focus today.

ECB is set to release its neutral rate report.

Recap

• Bank of England Rate Cut: Cut rates by 25bp as expected; GBP initially fell on dovish sentiment.
• Dovish Signals: seven members supported the cut, while two unexpectedly favoured a 50bp cut; the growth forecast lowered to 0.75%.
• Forward Guidance: BoE signalled just two more rate cuts, but markets expect three, potentially lowering the base rate to 3.75% by year-end.
• GBP Recovery: Some losses were pared after Governor Bailey urged markets to focus on meeting minutes rather than the voting split.
• USD Performance: USD regained ground as Treasury yields climbed, though higher-than-expected initial jobless claims limited gains.

Today’s Rates

Today's Interbank Rates at 10:25 am against GBP movement.

GBP>EUR – 1.1988

GBP>USD – 1.2420

EUR>GBP – 0.8339

EUR>USD – 1.0386

GBP>CAD – 1.7833

GBP>AUD – 1.9801

GBP>SEK – 13.545

GBP>CHF – 1.1287

GBP>PLN – 5.0229

GBP>AED – 4.5753

GBP>HKD – 9.7021

GBP>ZAR – 22.940

Today’s Key Takeaways

• USD Strength: US Treasury Secretary Scott Bessant reaffirmed support for a strong USD and no changes to debt issuance plans.
• Hawkish Fed Comments: Fed’s Lorie Logan suggested rates may already be neutral, reducing the need for further cuts if inflation cools.
• Key US Job Data: Markets await January job numbers (expected +170K); seasonal factors and LA wildfires could impact results.
• Payroll Revisions: If annual payroll numbers are revised downward, USD could face pressure.
• ECB Neutral Rate Report: A higher neutral rate could limit ECB rate cuts; Schnabel sees 2%-3%, Rehn suggests a midpoint of 2.50%.
• EUR Outlook: Markets expect European rates to drop to 1.75% (current: 2.75%); a neutral rate projection at 2%+ may strengthen EUR.
• BoE Watch: UK markets await comments from BoE’s Huw Pill for any follow-up on yesterday’s policy signals.

6th February 2025

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