24 June 2025

GBP

The Bank of England held rates at 4.25% as expected Thursday, although the vote split showed a slightly more dovish outcome than forecasted, with three members voting for a rate cut. 

The minutes highlighted signs of labour market easing, potentially giving the MPC room to look through above-target inflation and cut interest rates in August's meeting. Markets are currently pricing this in at a 76% probability.

UK year-over-year CPI exceeded expectations on Wednesday, coming in at 3.4% versus the 3.3% forecast, though easing slightly from last month’s 3.5%. Core CPI came in as expected at 3.5%. Retail Sales rounded off the week for the pound, dropping considerably more than expectations, falling 2.7% in May 2025.

This week, UK PMI data came in above forecasts, with manufacturing printing at 47.7 against estimates of 46.9 and services at 51.3, slightly above the expected figure of 51.2. Throughout the week, multiple MPC members will be speaking; most notably, the BoE Governor, Andrew Bailey, will speak today at 3pm and again on Thursday at 12pm.

EUR

It was a quiet data week last week for the Eurozone, with the only data of note showing Eurozone Final CPI came in on forecast and in line with last month's figure of 1.9%. This supports market expectations that the ECB will only cut interest rates a maximum of 25 basis points for the remainder of the year.

However, ECB policymaker Centeno told reporters in an interview that the eurozone economy needs 'further stimulus'. His term as Portugal's central bank governor does, however, end before the ECB's next meeting on July 24th, but he has backed further cuts in the coming months.

Eurozone PMIs came in more or less in line with expectations, with manufacturing pricing at 49.4 versus expectations of 49.6 and services at 50.0, in line with last month's reading. The breakdown saw French PMIs coming in below forecasts while German PMIs came in above.

Today, the German Ifo Business Climate was released, coming in slightly above forecast at 88.4. On Friday, the Spanish year-over-year Flash CPI is expected to remain in line with last month's reading of 2.0%.

USD

Following developments that took place in the Middle East over the weekend and escalations in the region the past 48 hours, the USD has seen volatility early this week. The USD originally strengthened in response to escalations, as it received some of the safe haven flows and appreciated further due to increases in oil prices. However, since the weekend, President Trump announced a ceasefire that, in turn, reversed this move, weakening the Dollar. Earlier this morning, it was reported Iranian forces broke this ceasefire. Markets remain vigilant to any developments. 

The Federal Reserve held rates as expected on Wednesday and signalled two further cuts in 2025, currently fully priced in by markets. The Fed's Chair, Jerome Powell, did, however, warn against placing too much emphasis on that view, saying he expected to see 'meaningful inflation' in the future as prices for goods increase on the back of President Trump's import tariffs. The quarterly economic projections indicated that by the end of the year, unemployment would rise to 4.5%, economic growth would slow to 1.4%, and inflation would be at 3%. 

Retail Sales also came in below forecasts last week, showing a decline of 0.9% against expectations of -0.5%, and unemployment claims came in close to estimates at 245K.

This week, the latest US Purchasing Managers’ Index (PMI) data, released yesterday, indicated stronger-than-anticipated performance across both the manufacturing and services sectors. The manufacturing PMI rose to 52.0, exceeding expectations of 51.1. Meanwhile, the services PMI also edged higher, registering at 53.1 versus the forecasted 52.9.

Jerome Powell testifies before the House Financial Services Committee and the Senate Committee today and on Wednesday. The final quarter-over-quarter GDP will be released on Thursday, forecasted to remain at -0.2%. The Federal Reserve's preferred measure of inflation, the Core PCE Price Index, is released Friday, with the month-over-month figure expected to remain at 0.1%.

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.