The Bank of England is expected to announce a policy change, with a likely interest rate cut of 25 basis points. The voting may show 2 members in favor of keeping rates steady and 7 in favor of a cut, with possibly 2 others supporting a 50 basis point reduction. UK economic indicators present a mixed scenario. Inflation is rising, while employment figures have disappointed. The market is also looking for another rate cut by the end of the year.

US Labor Market Focus

In the US, the Jobless Claims report will take center stage. Initial claims are expected to rise to 221,000, up from 218,000, and Continuing Claims are anticipated to hit 1,950,000, up from 1,946,000. Recent trends indicate low firing and low hiring amid uncertainties related to tariffs. The results may affect how people perceive the Non-Farm Payroll data. Strong figures could lead to a reassessment, while weak ones may reinforce expectations for a rate cut. Scheduled speeches from central bank officials include Fed’s Bostic at 14:00 GMT and Fed’s Musalem at 14:20 GMT. As we near the Bank of England’s decision on August 7, 2025, a 25 basis point cut is widely expected. This aligns with the gradual easing seen this year to support a delicate economy. UK inflation recently rose to 2.3%, and unemployment increased to 4.6%, putting the Bank in a challenging spot. For traders, this mixed data raises uncertainty about the BoE’s upcoming statement, making options strategies on GBP/USD appealing. If the BoE adopts a strongly dovish stance, the pound may test yearly lows. On the other hand, hesitation to cut could lead to a sharp rally. Implied volatility on short-term sterling options is rising ahead of the announcement.

Impact on Interest Rate Futures

Later in the day, focus will shift to US Jobless Claims, especially after last week’s disappointing Non-Farm Payrolls report showed only 170,000 jobs added. Since early 2025, initial claims have fluctuated between 210K and 230K, a trend that continued through much of 2024. A number significantly above the expected 221K would indicate a cooling labor market and support a Federal Reserve rate cut in the autumn. This data could directly influence interest rate futures, which currently show a high likelihood of a Fed cut by November. A weak claims number would likely increase those odds, benefiting long positions in SOFR futures. In contrast, a surprisingly strong number could quickly reverse these dovish expectations. We should closely monitor the Fed speakers, especially voting member Musalem at 14:20 GMT. His take on the recent employment data could cause swings in the US dollar index and short-term interest rate swaps. Remember, the Fed began its easing cycle with its first cut back in December 2024; any signals of a pause could surprise the market. Create your live VT Markets account and start trading now.

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