The US dollar stabilized last week following the release of June’s US Personal Consumption Expenditure (PCE) report, which is the Federal Reserve’s preferred inflation gauge. The YoY core PCE showed a smaller-than-expected decline, coming in at 2.6% rather than the anticipated 2.5%. This led to market expectations of only two rate cuts in 2024 (at least for now), one in September and one in December. However, if inflation continues to decline over the next few months, markets might start anticipating a third rate cut this year, possibly in November.

This week, the US interest rate decision will be announced, with expectations that the Federal Open Market Committee will keep rates unchanged at 5.5%. Traders will also be paying close attention to the Federal Reserve Chairman’s press conference for insights into upcoming monetary policy.

The following day, the Bank of England will announce its interest rate decision, expected to be a 25-basis point cut from 5.25% to 5.00%. Markets will scrutinise the Monetary Policy Committee vote to gauge the consensus on this decision, anticipating how members might vote in future meetings. Additional clarity may come from the press conference of the Bank of England Governor regarding the direction of interest rates for the rest of the year.

Before the end of the week, the US jobs report for July will be released, providing an overview of the US labour market and unemployment levels. The NFP report, along with inflation data, will influence the Federal Reserve’s monetary policy decisions. Forecasts suggest a decline in jobs added to the US economy, from 206,000 in June to 177,000 in July. A continued decline in job creation would indicate a cooling labour market, potentially allowing the Federal Reserve to ease its current policy tightening. The speed at which interest rates return to neutral levels, which neither stimulate nor hinder economic growth, will depend on how quickly labour market data declines and the inflation rates retreat to their 2% target.

Economic Data Highlights (As per UAE time) 

Tuesday 30th of July

• EUR – Gross Domestic Product (Q2)
• EUR – German Inflation Rates (Jul)
• USD – JOLTS Job Openings (Jun)
• USD – Consumer Confidence (Jul)

Wednesday 31th of July

• JPY – Industrial production (Jun)
• AUD – Inflation rates (Q2)
• CNY – Manufacturing and Services PMI (Jul)
• BOJ Rate Decision
• EUR – Inflation Rates (Jul)
• Crude Oil Inventories
• Fed Rate Decision & Press Conference

Thursday 1st of August

• EUR – Unemployment Rates (Jun)
• Bank of England Rate Decision & Press Conference
• USD – ISM Manufacturing PMI (Jul)

Friday 2nd of August

• CHF – Inflation Rates (Jul)
• USD – Non-farm Payrolls (Jul)