UK: Weekly FX Market Update 14 August
Will the UK economy continue to grow despite its issues of high inflation, labour shortages, a possible housing crisis and higher interest rates?
Or will it decline and fall into stagflation as the National Institute of Economic and Social Research (NIESR) expects?
Last Fridays GDP beat the forecasts and showed 0.5% monthly growth, 0.2% quarterly growth and a 0.4% yearly gain – and yet there wasn’t any significant impact on the pound.
UK unemployment data is released this Tuesday and UK CPI is released on Wednesday.
If unemployment and CPI jump higher, that could show a step towards the NIESR stagflation path and produce a weaker pound.
If unemployment stays steady, or even declines, and inflation moves lower as expected, could sterling strengthen?
At the start of the Ukraine war, the euro weakened on news of energy price rises and threats to pipelines being closed.
Last week, Liquid Natural Gas prices spiked higher by 40% over fears of an Australian worker strike.
The euro was relatively unmoved, but Goldman Sachs is warning that European prices could double or even triple this winter.
Could these issues illicit the same euro weakness response?
US GDP is 2.4% , Yearly US CPI is now a pleasing 3.2% and the US continues to add new jobs with 187k added in July. What will the Fed decide in September and how will the market react?
Would a hold on rates be treated as a reason to sell the dollar as the hiking cycle comes to an end?
Or will this be regarded as positive reflection on the US economy, with a ‘soft landing’ expected, and a period of US Dollar outperformance against the pound and euro?
Main events for this week:
Mon Aug 14
No top Tier Data
Tue Aug 15
All Day France and Italian Bank Holiday
02:30 AUD MPB Meeting Minutes
03:00 CNY Industrial Production
07:00 GBP Claimant Count Change/Average Earnings/Unemployment Rate
10:00 EUR German ZEW Economic Sentiment
13:30 CAD CPI
13:30 USD Retail Sales
16:00 USD FOMC Kashkari Speaks
Wed Aug 16
03:00 NZD Official Cash Rate
04:00 NZD RBNZ Press Conference
07:00 GBP CPI
10:00 EUR Final GDP
13:30 USD Building Permits
14:00 USD Industrial Production
19:00 USD FOMC Meeting Minutes
Thu Aug 17
02:30 AUD Employment Data
13:30 USD Unemployment Claims
Fri Aug 18
07:00 GBP Retail Sales
10:00 EUR Final CPI