Currency Markets Rally Amid Central Bank Uncertainty.

• GBP/USD Rally: The GBP/USD pair is on a seven-day positive streak, driven by investor expectations that the U.S. Federal Reserve will ease monetary policy in September, weakening the U.S. Dollar.
• Central Bank Speeches: Focus is on speeches by BoE Governor Andrew Bailey and Fed Chair Jerome Powell at the Jackson Hole Symposium, which may clarify future interest rate directions.
• UK Economic Data: Strong UK PMI reports have reduced market expectations for a BoE rate cut in September, further boosting the Pound against the Dollar.
• USD Struggles: The U.S. Dollar Index is retreating after a brief recovery, with investors awaiting Powell’s speech for insights on potential Fed rate cuts.
• Eurozone Activity: Eurozone PMI data shows growth in August, but underlying concerns persist, particularly in manufacturing, as the Euro nears a 13-month high against the U.S. Dollar.

GBP: The GBP/USD pair continues its upward trend for the seventh consecutive day, trading around 1.3105 during the early European session on Friday. Investor confidence is growing that the U.S. Federal Reserve (Fed) will begin easing monetary policy at the upcoming September meeting, weakening the U.S. Dollar (USD) across the board. Meanwhile, the spotlight is on Bank of England (BoE) Governor Andrew Bailey and Fed Chair Jerome Powell’s speeches at the Jackson Hole Symposium on Friday, which could provide more clarity on the future of interest rates. The minutes from the Fed’s July 30-31 meeting reveal that most policymakers supported a rate cut next month, given the progress toward reducing inflation. On Thursday, Boston Fed President Susan Collins also indicated that rate cuts might soon be appropriate, as inflation data shows increasing confidence in returning to the 2% target. On the other hand, investors have slightly tempered their expectations for a BoE rate cut in September, following stronger-than-expected Purchasing Managers’ Index (PMI) reports. This has further bolstered the Pound Sterling (GBP) against the USD. Data released by the Chartered Institute of Procurement & Supply and S&P Global on Thursday showed that the UK’s Composite PMI exceeded expectations, rising to 53.4 in August from 52.8 in July. Similarly, Manufacturing PMI increased to 52.5 in August, beating the forecasted 52.1, while Services PMI climbed to 53.3 from 52.5, also surpassing estimates. As a result, the market now sees less than a 30% chance of a BoE rate cut in September.

USD: The U.S. Dollar Index (DXY) is struggling to sustain the recovery it experienced on Thursday, retreating towards the lower end of its weekly range. The U.S. economic calendar features July’s New Home Sales data on Friday, but the key focus will be Fed Chairman Jerome Powell’s keynote speech at the Jackson Hole Symposium at 14:00 GMT. On Thursday, the USD gained ground against its rivals as preliminary S&P Global PMI data for August indicated continued robust expansion in the private sector. The risk-averse market sentiment, reflected by sharp declines in major Wall Street indexes, provided an additional boost to the USD. However, after rising 0.4% on Thursday, snapping a four-day losing streak, the USD Index is back on the defensive, last seen down 0.2% on the day at around 101.30. Meanwhile, U.S. stock index futures are gaining between 0.3% and 0.55%, signaling an improving risk mood in the European session. Bank of Japan (BoJ) Governor Kazuo Ueda told the Japanese parliament on Friday that there is no change in their stance on adjusting monetary easing if the economy and inflation continue to align with forecasts. Ueda also noted that they are not considering selling long-term Japanese government bonds as a tool to adjust interest rates. As a result, the USD/JPY pair faced renewed selling pressure following Ueda’s comments, trading around 145.50, down 0.5% on the day. Earlier, data from Japan showed that the National Consumer Price Index (CPI) rose 2.8% year-on-year in July, matching the flash estimate.

EUR: Economic activity in the Euro Area saw an uptick in August, according to the latest HCOB PMIs, but the details suggest that underlying fundamentals might be weaker than they appear, according to HCOB chief economist Dr. Cyrus de la Rubia. He described the situation as “a tale of two worlds,” where the manufacturing sector remains in recession, while the services sector continues to grow at a decent pace. However, with the temporary Olympic boost in France fading and signs of waning confidence across the Eurozone’s service industry, it’s likely only a matter of time before the struggles of the manufacturing sector begin to impact services. The Euro hit a fresh 13-month high against the U.S. dollar on Monday and is close to posting another high today. The U.S. dollar remains under pressure as the Federal Reserve gears up for a series of expected interest rate cuts starting in September. Fed Chair Jerome Powell’s appearance at the Jackson Hole Symposium on Friday may offer the market more insight into the central bank’s current thinking and the anticipated pace of rate cuts. Today’s EUR/USD price action is expected to remain within Monday’s range of 1.1099-1.1174, with a higher likelihood of testing yesterday’s peak.