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Friday, August 08, 2025
What’s happening: The British pound rose against the US dollar on Thursday, as investors digested the Bank of England’s latest interest rate decision.
What happened: British bond yields climbed during the session, sending the GBP/USD forex pair to its strongest level in around two weeks.
Inflation concerns fuelled expectations of fewer interest rate cuts for the remainder of the year.
Why it matters: The Bank of England announced an interest rate cut of 25 basis points (bps) on Thursday. The latest move lowered UK’s key Bank Rate to 4%, the lowest mark since 2023. This marked the central bank’s fifth rate cut since August 2024.
The latest decision came amid a division among policymakers, with the rate cut being approved by a 5-4 majority. The initial vote resulted in a split decision, and a second voting round was required to announce a final policy decision.
The BoE also increased its inflation projections for September from 3.7% to 4%. Due to this, investors pared back estimates of another rate cut in 2025. Lower speculations of the Bank of England’s monetary policy easing lend support to the sterling.
The latest data released showed that UK’s inflation surged to more than a one-year high of 3.6% in June, with services inflation remaining above the 4% level for over three years.
Yields on UK’s government bonds climbed, taking the 2-year yield to 3.88% on Thursday.
However, strength in the US dollar weighed on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.2% to 98.40 on Thursday.
The GBP/USD jumped to 1.3445 on Thursday, while the GPB/EUR rose to 0.8678.
What to watch: Investors will continue monitoring UK’s inflation level and rate-related comments from the BoE’s policymakers.
Data on unemployment rate, average earnings and employment change, due to be released on Tuesday, will also remain in focus. The UK’s unemployment rate, which rose to 4.7% in the three months to May, is expected to climb further to 4.8% in June.
Average weekly earnings, including bonuses, are projected to surge by 5% year-over-year. The number of employed people in the UK, which climbed by 134,000 in the three months to May, is expected to rise by 65,000 in June.
Context: Japan’s equity markets strengthened on Friday, amid expectations of robust earnings reports from domestic companies.
Details: Shares of Sony Group surged around 4% this morning, following a 4.1% gain in the previous session, after the company raised its operating profit outlook for the full year. Shares of SoftBank Group also jumped over 10% after the company reported stronger-than-expected quarterly profit, driven by a rebound in its tech funds business and higher AI investments.
On the domestic data front, Japan’s current account surplus narrowed to ¥1,348.2 billion in June, from ¥1,763.5 billion in the year-ago month. The figure was the lowest since January and missed market estimates of ¥1,480 billion.
Japan’s household spending surged 1.3% year-over-year in June, following a 4.7% gain in the previous month. However, the figure missed expectations of 2.6% growth. Bank lending jumped by 3.2% year-over-year in July, compared to 2.7% growth in June.
Japan’s Nikkei 225 jumped 1.93% to trade at 41,849.77 this morning, while the TOPIX index surged 1.41% to 3,030.04, hitting an all-time high.
What to watch: Data on Reuters Tankan index, PPI and machine tool orders, due to be released on Wednesday, will remain in focus. Producer prices in Japan, which climbed 2.9% year-over-year in June following a 3.2% rise in the previous month, are expected to surge by 2.6% in July. Japan’s machine tool orders declined by 0.5% year-over-year to ¥133,150 in June, while the Reuters Tankan index for Japanese manufacturers surged to +7 in July from +6 in June.
Tariff-related announcements from Trump are also expected to impact the JPY/USD pair ahead.
Other Markets: US trading indices closed mixed on Thursday, with the Dow Jones index and S&P 500 down by 0.51% and 0.08%, respectively, and the Nasdaq 100 up by 0.32%.
France’s President Emmanuel Macron reaffirmed the country’s full support for a ceasefire between Ukraine and Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Sri Lanka’s number of foreign tourists arrivals jumped by 6.6% year-over-year to 200,244 in July, lending support to the LKR/USD forex pair.
Indonesia’s motorbike sales contracted by 2.0% year-over-year to 587,048 units in July, following a 0.3% decline in the previous month. Motorbike sales falling for the third consecutive month sent the IDR/USD pair lower in forex trading this morning.
Brazil’s new car sales surged 14.2% to 243,200 units in July, with passenger car sales jumping 14.3% to 181,800 units, which lent support to the BRL/USD forex pair.
Argentina’s industrial production jumped by 9.3% year-over-year in July, following a 6% gain in the previous month, which sent the ARS/USD pair slightly higher in forex trading this morning.
China’s current account (1300 UAE Time), India’s foreign exchange reserves (1530 UAE Time), Canada’s unemployment rate (1630 UAE Time), employment change (1630 UAE Time), full time employment (1630 UAE Time), part time employment (1630 UAE Time), participation rate (1630 UAE Time) and average hourly wages (1630 UAE Time), as well as US Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time).
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