Pound remained in slumber mode.
The British Pound (GBP) held on to minor gains during the European trading session on Monday, with US markets closed for Labor Day. This indicates very small volumes, considerably thinner than on a usual Monday. However, the UK market had already digested this morning’s S&P Global/CIPS Purchasing Managers Index (PMI) for the manufacturing sector, which fell in line with expectations to 52.5.
US markets closed for public holidays, the US Dollar Index continues to rise.
Meanwhile, the US Dollar Index (DXY), which measures the value of the US dollar against A basket of six foreign currencies is still recovering from a significant selloff over a week ago. Last week, however, the Greenback rallied on strong US economic data, which may restrict the US Federal Reserve’s (Fed) initial rate drop to only 25 basis points in September. With fresh PMI data due this week and the US jobs report on Friday. The extent of the interest rate decrease next week will be determine by this week’s data.
UK Manufacturing PMI came in at 52.5, which met forecasts.
S&P Global’s Manufacturing Purchasing Managers Index (PMI) for August came in at 52.5, unchanged from the previous month.
On Monday, US markets will be close in commemoration of Labor Day. The CME Fedwatch Tool predicts a 69.0% chance of a 25 basis point (bps) interest rate drop by the Fed in September, against a 31.0% possibility of a 50 bps cut. Another 25 basis point drop (assuming September is a 25 basis point cut) is projected in November by 48.9%, with a 42.0% likelihood that rates will be 75 basis points (25 bps + 50 bps) lower than current levels and a 9.1% chance that rates will be 100 (25 bps + 75 bps) lower.
Regarding the Bank of England (BoE), markets are pricing in no rate cut for the September 19 meeting, however the November 7 decision has an 87.2% near certainty of the BoE cutting rates by 25 basis points.
The US ten-year benchmark The rate is currently at 3.90% and will remain unchanged on Monday owing to US bank holidays.
The UK 10-year Gilt Benchmark trades at 4.06% and rose on Monday after closing at 4.01% Friday.
European shares are falling further, down more than 1% on the day. The UK’s FTSE 100 is less bearish, with losses of less than 0.5%.
