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GBP Failing to Benefit From Run Higher in BoE Rate Expectations

FOREX
  • Rate expectations remain a key driver, although GBP has failed to benefit from more pressure on the Bank of England - as market-implied policy rates now see a solid chance of 6.50% peak rates in March of next year. The market moves place more focus on the earnings release from the UK due next week, which pay rewards still increases at 6-7% on a 3m/YoY basis. Early GBP/USD strength was partially reversed on the release of the Decision Maker Panel survey. Respondents found that short-term inflation expectations were moderating, although longer-term expectations stubbornly rose.
  • JPY is higher against most others in G10 against a broad risk-off backdrop. Equities across mainland Europe are lower, putting the EuroStoxx50 off by over 1.50%. EUR/JPY is extending a pullback from the late June cycle high, reversing back below 157.00.
  • Antipodean currencies including the AUD and NZD are the session's outperformers so far, helping AUD/USD retrace a large part of the Wednesday step lower.
  • Focus ahead rests on the state of the US jobs market. ADP Employment Change, weekly US jobs data and the ISM Services index will all be carefully watched for clues ahead of the NFP release on Friday. Markets look for ADP employment change to slow to 225k, while the ISM Services headline is seen improving to 51.2. Fed's Logan is also set to speak, appearing at Colombia University to discuss the challenges facing central bankers.
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