What are the main events for today?

There are no notable releases in the European session as we just get the Final readings of the PMIs. The focus will be mainly on the BoE Policy Decision where the expectations are skewed for a rate cut. In the American session, we have the US Jobless Claims, the Canadian Manufacturing PMI and the US ISM Manufacturing PMI.

11:00 GMT/07:00 ET – BoE Policy Decision

The market is
assigning a 60% probability of a 25 bps rate cut for the BoE, bringing the Bank
Rate to 5.00% from the current 5.25% level. The expectations look
misplaced given the recent comments from BoE’s Pill and the economic data.

The BoE’s chief
economist Huw Pill said that it was an open question of whether the time for a rate cut
was now or not and added that more data will come before the next policy
decision, but they had to be realistic about how much any one or two releases
could add to their assessment.

This suggested
that there wasn’t much willingness to deliver the first cut in August unless
the inflation data came out extremely good or the jobs data showed an extremely
ugly picture. Well, the latest UK CPI wasn’t good as the Core figure and the Services inflation remained
unchanged. On the labour market side, the latest report was mostly in line with expectations with wage growth
remaining elevated.

12:30 GMT/08:30 ET – US Jobless Claims

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain pretty much stable around cycle lows and inside the 200K-260K range
created since 2022. Continuing Claims, on the other hand, have been on a
sustained rise, although they have stabilised more recently.

This shows that
layoffs are not accelerating and remain at low levels while hiring is more
subdued. This is something to keep an eye on. This week Initial Claims are
expected at 236K vs. 235K prior, while Continuing Claims are seen at 1860K vs.
1851K prior.

14:00 GMT/10:00 ET – US July ISM Manufacturing PMI

The US ISM
Manufacturing PMI is expected at 48.8 vs. 48.5 prior. Last week, the S&P Global US
Manufacturing PMI slipped
to 49.5 from 51.5 prior, although the commentary was largely positive.

The survey brought
some more welcome news in terms of inflation stating that “the rate of increase
of average prices charged for goods and services has slowed further, dropping
to a level consistent with the Fed’s 2% target”.

On the negative
side, “both manufacturers and service providers are reporting heightened
uncertainty around the election, which is dampening investment and hiring” and
“input costs rose at an increased rate, linked to rising raw material, shipping
and labour costs. These higher costs could feed through to higher selling
prices if sustained or cause a squeeze on margins”.

This article was written by Giuseppe Dellamotta at www.forexlive.com.