Interest rate decisions loom amid Bitcoin surge and yen volatility

The Bank of England decides interest rates on Thursday. Editorial credit: William Barton, via Shutterstock

After a wave of soft data left the pound ever-so-slightly in the red against the US dollar and euro last week, investors hope for a better performance ahead of the Bank of England’s interest rate decision on Thursday.

Last week, the Japanese yen sent shockwaves across markets, unexpectedly gaining over 4% against the US dollar in July. Traders expect the yen’s volatility to increase this week as the Bank of Japan could raise interest rates on Wednesday.

On Friday, we heard the US headline PCE came in line with expectations, at 0.1% but core PCE rose by 0.2% from a month prior and beating market expectations of a 0.1% increase.

US personal spending matched market forecasts in June, adding 0.3% while personal income added 0.2%, slightly lower than expectations of 0.3% and May’s 0.4% gain.

Bitcoin jumped towards $70,000 this morning, potentially hitting the key level for the first time in six weeks following presidential candidate Trump declaring his support for crypto in his keynote speech at a conference in Nashville over the weekend. The Republican candidate promised to end the Biden administration’s “crusade” against Bitcoin.

It’s been almost a week since current US president, Joe Biden, withdrew as a candidate for the upcoming US elections, instead handing the baton to Kamala Harris. In less than a week, the Democratic candidate has raised over $200mn for her White House bid. This is more than the combined efforts of Biden and Trump in June alone.

Here’s what to look out for this week…

Tomorrow, investors will receive the latest flash GDP stats for the euro area, Germany, France, Spain and Italy. Markets expect the euro area economy to have grown by 0.2% in quarter two of 2024.

After lunch on Tuesday, the German inflation rate is expected to remain unchanged and US JOLTs are due for June.

On Wednesday, the spotlight is on the euro area inflation rate for July and the Federal Reserve, for its latest interest rate decision.

The Bank of England decision will come on Thursday, markets expect the rate to fall by 25 basis points, which would take the headline rate to 5.0%.

Then on Friday afternoon, US investors will be listening out for July’s non-farm payrolls and unemployment rate.

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GBP: Standout data this afternoon

This morning, the economic calendar holds UK consumer credit, mortgage approvals and CBI trades. Unexpected strength from UK services inflation last week may have affected policymakers’ outlook on whether to push ahead with the first rate cut since 2020.

GBP/USD: the past year

 

EUR: All eyes on inflation

On Wednesday, the euro area inflation for July is expected to fall from 2.5% to 2.3% – taking another step towards the European Central Bank’s 2% target. Before then, the spotlight remains on the euro area’s economic performance for the second quarter of 2024, which is expected to have grown by 0.2%.

GBP/EUR: the past year

 

USD: Fed expected to hold rates

The Federal Reserve is expected to keep rates unchanged at 5.5% as it moves closer to a pivot on monetary policy as early as September.

USD/EUR: the past year

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