Pound Exchange Rate Plummets Due to Early Rate Cut Expectations
Today, the pound exchange rate suddenly plummeted. This is attributed to Bank of England Governor Bailey hinting in an interview with The Guardian about the "possibility of becoming a bit more aggressive towards rate cuts." This is conditional on inflation indicators continuing to be favorable. As a result, the GBP/USD sharply fell from the mid-1.32 level to the high-1.31 level, and the GBP/JPY plunged from the mid-194 yen level to near 193 yen.
Later, the UK's DMP inflation expectations for September will be released in the London market. The market predicts the inflation rate one year ahead to be +2.7%, a slight increase from the previous 2.6% in August. On the other hand, the sales price forecast for three months ahead is expected to slow down to +3.4% from the previous 3.6%. As the pound shows volatile movements, caution is necessary as market reactions may become more sensitive than usual.
Yen Exchange Rate Trends
The yen exchange rate continues to draw attention. The USD/JPY temporarily rose above the 147 yen level, the EUR/JPY reached the mid-162 yen level, and the GBP/JPY saw yen depreciation up to the 195 yen level, but the rise has currently paused. The appreciation of the yen due to the "Ishiba Shock" at the end of last week has been completely reversed, following a meeting between Prime Minister Ishiba and Bank of Japan Governor Ueda, which lowered the possibility of immediate rate hikes. Additionally, the stronger-than-expected U.S. ADP employment data released yesterday supported the rise of the USD/JPY.
Upcoming Key Indicators and Events
Economic indicators scheduled to be released today include:
- Turkey Consumer Price Index (CPI) for September
- Final Non-Manufacturing PMI figures for September from various countries
- Eurozone Producer Price Index (PPI) for August
In the United States, data such as Initial Jobless Claims (for September 22–28), Factory Orders for August, and Durable Goods Orders (final figures for August) will be released.
Speaking events include scheduled speeches and events by Kansas City Fed President Schmid, Minneapolis Fed President Kashkari, and Atlanta Fed President Bostic.
Trading Strategy
Today, we are focusing on selling GBP, but since the pound exchange rate is highly volatile, careful attention to entry points is necessary.
