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UK: Weekly FX Market Update 12 December

CalendarDecember 12, 2022
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GBP

  • This week includes a host of data releases - UK GDP, Unemployment Data, CPI & Retail Sales are all released.

  • The BoE sets interest rates on Thursday, with the market expecting a 0.50% hike.

  • Will the rate hike keep the pound buoyant?

The pound has continued to climb higher against the US Dollar and Euro since September. Will the recent Sterling strength continue or will the data releases bring it to an end?

EUR

  • Last week Eurozone GDP was revised up to 0.3%, a positive surprise.

  • The ECB sets interest rates on Thursday – Does Lagarde have a Christmas surprise for the market?

  • With inflation at 10%, a Reuters poll shows 51 out of 60 economists favour a 0.50% rate hike to 2.0%.

USD

  • Last month’s US CPI disappointed the market, by surprisingly dropping to 7.7%. The next reading is on Tuesday, with an expectation of 7.3% - what impact could this have on the FOMC decision the following day?

  • Bloomberg WIRP shows a 0.5% rate hike is expected from the Fed on Wednesday, inline with the hikes expected from the ECB and BoE.

  • The US$ Index has fallen 10% since September, will this weakness continue?

The US Treasury 10 year yield has inverted, implying that a recession is the Bond markets major fear, rather than inflation. Will the Fed agree?

This could be the last full trading week of the year, will investors use the liquidity to hedge or will they risk giving themselves indigestion over Christmas as they worry about possible volatile market moves?

Events for the weekend ahead:

Mon Dec 12

07:00 GBP GDP/Industrial Production

Tue Dec 13

07:00 GBP Claimant Count Change/Average Earnings/Unemployment Rate

11:00 GBP BoE Bailey Speaks

13:30 USD CPI

Wed Dec14

07:00 UK CPI

19:00 US FOMC Interest Rate Decision/Press Conference

Thu Dec 15

12:00 GBP BoE Interest Rate Decision/Statement

13:15 EUR ECB Interest Rate Decision/Statement

13:30 USD Retail Sales

13:45 EUR ECB Press Conference

Fri Dec 16

07:00 GBP Retail Sales

09:00 EUR Flash Manufacturing/Services PMI

09:30 GBP Flash Manufacturing/Services PMI

10:00 EUR Final CPI/Trade Balance

Author

Trevor Charsley

Trevor Charsley

Senior Market Strategist

Trevor has over 25 years' trading and sales experience. He produces regular market and technical analysis as well as help with the structure and management of FX hedging policies. Trevor is often listed among the top "currency forecaster on Bloomberg".

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