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UK: Weekly FX Market Update 17 July

CalendarJuly 17, 2023
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GBP

  • 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?

EUR

  • 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.

USD

  • 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

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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