UK: Weekly FX Market Update 17 July
Last week sterling gained 2% against the US dollar but slipped slightly against the euro.
The drivers for GBPUSD were rising UK Average Earnings and a falling US CPI.
GBPEUR could be the bigger market mover this week as we await both UK CPI and Final Eurozone CPI to be released.
Headline UK CPI is released on Wednesday and is expected to fall to 8.2% from 8.7%. Core CPI is expected to stay at 7.1%.
UK Retail Sales will finish the week off.
Can GBPUSD continue to strengthen if UK inflation stays strong?
EURUSD gained 2.25% last week, making a new 2023 high at 1.1245 in the process.
The move higher accelerated after the release of soft US inflation data.
ECB President speaks on Monday, whilst Final Eurozone CPI is released on Wednesday.
Eurozone CPI is expected to stay steady at 5.5%.
The market may use the CPI release to gauge whether rates will be hiked by the ECB in July and September, or just July.
As US headline CPI dropped sharply from 4% to 3% the market asked; Can a soft landing for the US economy really be engineered?
The US dollar index dropped the most in a week since November 2022 after the inflation data was released.
The market will look towards Industrial production data on Tuesday and Unemployment Claims on Thursday to gauge whether they can expect one or two more rate hikes from the Fed.
Will the US dollar continue to weaken as the market assumes the Fed will finish its rate hiking cycle shortly?
Events for the week ahead:
Mon Jul 17
03:00 CNY GDP
09:15 EUR ECB President Lagarde
13:30 USD Empire State Manufacturing Index
Tue Jul 18
02:30 AUD Monetary Policy Meeting Minutes
13:30 CAD CPI
13:30 USD Retail Sales
14:15 USD Industrial Production
15:00 USD Business Inventories
17:00 GBP MPC Ramsden Speaks
23:45 NZD CPI
Wed Jul 19
07:00 GBP CPI
10:00 EUR Final CPI
13:30 USD Building Permits
Thu Jul 20
02:30 AUD Employment Change
09:00 EUR Current Account
13:30 USD Unemployment Claims/Philly Fed Manufacturing Index
15:00 EUR Consumer Confidence
Fri Jul 21
00:01 NZD RBNZ Statement of Intent
07:00 GBP Retail Sales
13:30 CAD Retail Sales