On Wednesday, global stock markets received a boost from a series of positive macroeconomic data from the EU and the US. The data set the stage for overall optimism. The fresh macroeconomic statistics complemented nicely the news of Nancy Pelosi's visit to Taiwan. Market participants sighed with relief when the visit of the House of Representatives Speaker did not unleash the political crisis between the US and China.
As for the economic calendar, the EU services PMI for July was reported slightly better than expected. The index rose to 51.2, higher than 50.6 in the forecast. Still, it undershot the print for June at 53.0. Nevertheless, the PMI calmed down investors and supported regional stock markets. Other macroeconomic indicators for the Eurozone did not please investors. The PPI grew to 1.1% on month, an uptick higher than the expected 1.0%. The annual rate of factory inflation surged to 35.8% last month.
The US released mixed economic data. The US services PMI came in better-than-expected at 47.3 in July, much lower than the score of 52.7 for June. The glaringly weak data indicates that the services sector in the US is losing momentum. The poor services PMI was offset by upbeat durable goods orders and the ISM non-manufacturing PMI.
The fresh economic data inspired market participants and improved demand for risky assets. An extra positive, albeit minor factor for the market sentiment was the statement from Fed's policymakers that the US economy had not entered a recession yet. A lot of experts would argue with the statement. Such remarks from the US government and the Federal Reserve are more politically-tinted rather than economically. The market considers such comments positive which creates robust demand in financial markets.
Investors found curious notes in other remarks from Fed's policymakers on further policy moves.Neel Kashkari and Mary Daly sent a message that the regulator would not slow down the pace of rate hikes in the near time. Besides, the Fed might decide to decrease interest rates in the next 2023 year.
In terms of fundamentals, market participants are anticipating the ADP employment report that is due today and the official nonfarm payrolls that are due tomorrow. Today the Bank of England will unveil its policy decision. The British regulator is expected to raise the key interest rate by a whopping 0.50% to 1.75% in an effort to tame rampant inflation.
How BoE rate hike might influence GBP
We suppose that the rate hike has been already priced in. Thus, market participants will shift focus toward the Governor's statements on further policy moves. The market is wondering how and at what pace the regulator will increase interest rates. If the Governor signals further aggressive monetary tightening and a sharp increase in borrowing costs, the pound sterling is likely to rise sharply in value.
To sum up, the odds are that stock markets will try to extend growth despite obscure economicprospects. An unexpected negative event could certainly disrupt a fragile rally.
Intraday forecast
GBP/USD
The currency pair found support at 1.2130. The positive outcome of the Bank of England's meeting could give the pair a kick and it could climb to 1.2315.
USD/JPY
The currency pair is trading higher amid lower geopolitical tensions around Nancy Pelosi's visit to Taiwan. If the pair settles above 134.15, it will rise higher to 135.15.
