UK: Weekly FX Market Update 16 January

January 16, 2023

GBP

Last week, the World Cup was deemed to be the reason for UK GDP gaining 0.1% in December rather than slumping by 0.2% as expected.
BoE Governor Bailey speaks today, 16 January, at 3pm. UK Average Earnings are released on Tuesday, CPI on Wednesday & Retail Sales on Friday. They could give us more direction.
Whilst GBPUSD made a run at 1.2200, GBPEUR tested 1.1300 to the downside following a hawkish stance by the ECB.

With the UK GDP unexpectedly surprising to the upside, will this allow the Bank of England to hike interest rates more aggressively going forward for as long as inflation dictates? UK CPI on Tuesday could therefore be a key release for the pound and the decision making of the BoE at the February meeting.

EUR

ECB Board Members continue to forecast hint at further interest rate hikes in the coming months.
The euro has benefitted on the back of the China re-opening theme.
Eurozone final CPI is released on Wednesday. ECB President Lagarde speaks on Thursday & Friday. Will she continue her hawkish mantra and strengthen the euro?

USD

The weak Services PMI data has been forgotten as the market digests US inflation dropping to a 12-month low of 6.5%.
Philadelphia Fed President Hawker considers rate hikes of 0.25% appropriate ‘going forward’. Could this easing of interest rate expectations encourage US$ weakness?
Did the US shopper have a good Christmas? US Retail sales out on Wednesday could tell us.

Events for the weekend ahead:

Tue Jan 17

02:00 CNY GDP

07:00 GBP Claimant Count Change/Average Earnings Index/Unemployment rate

13:30 CAD CPI

Wed Jan 18

00:00 JPY BoJ Policy Rate/Press Conference

07:00 GBP CPI

10:00 EUR Final CPI

13:30 USD Retail Sales

Thu Jan 19

13:30 USD Unemployment Claims

Fri Jan 20

07:00 GBP Retail Sales