The UK Chancellor of the Exchequer, Jim Reeves, is set to unveil the first budget of the new Labour government on Thursday. Government sources indicated last week that Reeves will raise approximately £40 billion through increased taxation and limited public spending cuts to improve public services and fill the budget deficit left by the previous administration. British media previously reported that Reeves is considering adjusting debt policies to create room for additional fiscal spending. This news has led to a rise in UK government bond yields and pushed the pound to rebound from a 9.5-week low of 1.2908 on Wednesday to a high of 1.2972 on Thursday. The exchange rate has since slightly retreated, trading near 1.2955. If Reeves truly alters fiscal rules, it could lead to a slowdown in the Bank of England's rate-cutting cycle, thereby impacting the future trajectory of the pound.
Additionally, some prominent figures in the global financial community gathered at the Saudi Future Investment Initiative Summit seemed to suggest that the market's bets on Federal Reserve rate cuts may be excessive. During panel discussions, when asked whether the Federal Reserve will implement two more rate cuts this year, none of the Wall Street titans, including CEOs from BlackRock, Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street, raised their hands. Most agreed that the Federal Reserve may cut rates once more by the end of 2024. BlackRock CEO Larry Fink expressed a similar view earlier on Tuesday. He believes that the Federal Reserve will not cut rates as much as the market expects due to high "implicit inflation." Contrary to other market participants' predictions of two more rate cuts by the Federal Reserve this year, the world's largest asset management firm anticipates only one rate cut remaining before the end of the year.
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Data to watch today includes France's Q3 GDP year-on-year preliminary estimate, Germany's October seasonally adjusted unemployment rate, Germany's Q3 seasonally adjusted GDP quarter-on-quarter preliminary estimate, the Eurozone's Q3 seasonally adjusted GDP quarter-on-quarter preliminary estimate, the Eurozone's October consumer confidence index final value, the US October ADP employment change, the US Q3 real GDP annualized quarter-on-quarter preliminary estimate, and Germany's October CPI year-on-year preliminary estimate.
US Dollar Index
The US Dollar Index fluctuated and consolidated yesterday, closing slightly lower on the day, with the exchange rate currently trading near 104.20. In addition to the Federal Reserve's expectations for a rate cut in November, which somewhat suppressed the exchange rate, the overall weak economic data from the US during the session also put pressure on the exchange rate. However, the cooling expectations for the Federal Reserve to continue aggressive rate cuts limited the downside for the exchange rate. Today, attention is on the resistance near 104.70, with support near 103.70.
Euro/USD
The Euro fluctuated higher yesterday, closing slightly higher on the day, with the exchange rate currently trading near 1.0820. In addition to short covering providing some support for the exchange rate, the US Dollar Index's retreat due to weak economic data also provided some support. Furthermore, good economic data from Germany during the session also lent some support. Today, attention is on the resistance near 1.0900, with support near 1.0700.
GBP/USD
The British Pound fluctuated higher yesterday, reclaiming the 1.3000 level and setting a 6-day high, with the exchange rate currently trading near 1.3010. In addition to short covering providing some support for the exchange rate, the US Dollar Index's retreat due to weak economic data also provided some support. Moreover, news that UK Chancellor Reeves is considering adjusting debt policies also provided some support. Today, attention is on the resistance near 1.3100, with support near 1.2900.
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