UK: Weekly FX Market Update 16 September

GBP

• Monthly UK Gross Domestic Product stagnated last week and pushed GBPUSD lower.

• This week, all eyes are on the interest rate decisions from the US Federal Reserve (Fed) on Wednesday and Bank of England (BoE) on Thursday.

• Former New York Fed President Daly suggests the Fed could still cut rates by 0.50% on Wednesday.

• Bloomberg only gives a 16% chance of a rate cut of 0.25% by the BoE.

• Can this widening interest rate differential push GBPUSD back to its recent highs?

EUR

• The ECB cut rates last week by 0.25% as had been expected.

• On Thursday, ECB President Lagarde said that monetary policy would be sufficiently restrictive ‘as long as necessary’.

• ECB President Lagarde on Friday said that she is considering another rate cut in October, if the economy suffers a major setback. However, with the next comprehensive set of EU economic data will only be available at the December meeting, are the ECB lining up to cut at year end?

USD

• Monthly Core US Consumer Price Index data showed a stubborn streak last week, rising by 0.30% rather than by 0.20% as the market had expected.

• This pushed the money markets to suggest that the Fed will cut rates by 0.25% rather than 0.50% this Wednesday.

• The Financial Times reports that the Fed is ‘wrestling with how aggressively to cut rates’.

• Goldman Sachs sees a 0.25% rate cut on Wednesday, followed by 0.25% rate cuts in both November and December.

• Will the US Dollar continue to slip lower in the face of this easing?

Main events for this week:

Mon Sep 16

13:30 USD Empire State Manufacturing Index

Tue Sep 17

10:00 EUR ZEW Economic Sentiment

13:30 CAD CPI

13:30 USD Retail Sales

14:15 USD Industrial production

Wed Sep 18

07:00 GBP CPI

10:00 EUR Final CPI

19:00 USD FOMC Interest Rate Decision

19:30 USD Fed Chair Powell Press Conference

Thu Sep 19

02:30 AUD Employment Data

12:00 GBP Bank of England Interest Rate Decision

13:30 USD Unemployment Claims

Fri Sep 20

05:00 JPY Bank of Japan Interest Rate Decision

06:00 JPY BoJ Press Conference

07:00 GBP Retail Sales

13:30 CAD Retail Sales