Sterling sharpens decline to four-week trough before Bank of England's decision
Sterling fell in European trade on Thursday against a basket of major rivals, extending losses for the third straight session against the dollar and hitting a four-week trough, before the Bank of England’s policy decision later today, widely expected to hold rates flat at 4.25%.
The US dollar continues to muscle up against main rivals on haven demand as the Israel-Iran conflict worsens, and after the Fed raised its inflation outlook this year.
The Price
The GBP/USD price fell 0.3% today to $1.3387, the lowest since May 21, with a session-high at $1.3429.
Sterling shed 0.1% on Wednesday against the dollar on risk aversion.
The BOE
The Bank of England is widely expected to maintain UK interest rates flat at 4.25%, the lowest since March 2023.
US Dollar
The dollar index rose 0.2% on Thursday, expanding the gains for the fifth straight session and hitting a week high against a basket of major rivals.
The Federal Reserve also raised its inflation outlook for 2025 and alluded to the difficulty of cutting interest rates before knowing the full impact of tariffs on prices.
Aussie loses ground after dismal labor data
The Australian dollar fell in Asian trade on Thursday against the US dollar, approaching a two-week trough after weak Australian labor data.
The data reduced the pressure on the Reserve Bank of Australia and boosted the odds of a rate cut in July.
The Price
The AUD/USD price fell 0.45% today to 0.6476, with a session-high at 0.6512.
The Aussie rose 0.5% on Wednesday against its US counterpart as risk appetite rebounded in the global markets.
Australian Data
Australia’s unemployment rate was unchanged at 4.1% in May as expected, same as the previous reading.
Australia’s economy lost 2.5 thousand jobs in May, missing estimates of the addition of 20.6 thousand new jobs, while the previous reading was revised downward to show the addition of 89.0 thousand jobs instead of 87.6 thousand.
The data will likely prompt the RBA to accelerate the pacing of interest rate cuts in future months.
Australian Rates
Following the labor data, markets now expect 70 basis points of Australian rate cuts by the end of the year.
The odds of an RBA 0.25% rate cut in July rose from 55% to 65%.
The RBA reduced interest rates twice since February to 3.85%, as inflation settled into the 2-3% target range.
Australian economy loses jobs unexpectedly in May
Australia’s economy lost 2.5 thousand jobs in May, missing estimates of the addition of 20.6 thousand new jobs, while the previous reading was revised downward to show the addition of 89.0 thousand jobs instead of 87.6 thousand.
