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UK: Weekly FX Market Update 17 October

CalendarOctober 17, 2022
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GBP

  • Chancellor Kwarteng has been sacked & replaced by Jeremy Hunt.

  • The new Chancellor has brought forward the fiscal statement to today at 11am. He will then speak to MP’s at 3pm.

  • Prime Minister Truss has been forced into a humiliating U-turn on corporation tax.

  • Bank of England Governor Bailey appears to have successfully calmed the gilts market. But what will Monday trading bring?

  • The UK’s economic credibility has been damaged. What will the long-term penalty for this be?

  • Truss is already a Prime Minister in office, but not in power. Is it possible that Truss can be replaced by angry Tory MPs?

  • UK economic data is worsening. GDP declined last month by 0.3%. The Consumer Price Index is released this week.

Today, the gilts market opens without the Bank of England’s emergency support facility available. 

The UK Consumer Price Index is released on Wednesday and Retail Sales on Friday. A CPI reading, above 10% could encourage sterling buying, while a weaker retail sales release could encourage sterling sellers. 

However, to what extent will UK politics dominate the headlines again and move the currency? Volatility could continue to be high.

EUR

  • Last week had a lack of economic data releases.

  • EURUSD was moved by sterling and US dollar themes. It eventually closed the week roughly unchanged.

  • This week again sees very little Eurozone economic data releases and only Manufacturing Index reports in the US.

USD

  • FOMC Meeting Minutes showed many committee members wanted to hold rates high “for some time”.

  • Minneapolis Fed President Kashkari said the bar to a pivot on current interest rate policy is “very high”.

  • Chicago Fed President Evans said that the Fed needs to see “inflation coming down”.

  • US Core CPI is now at a 40 year high of 6.6%.

  • US inflation expectations have risen for the first time since March this year.

  • This week has few economic data releases, with only St. Louis Fed President Bullard scheduled to speak.

RoW

USDJPY made new highs. At levels not seen since 1990.

Mon Oct 17

08:00 UK Gilts Market Open

Tue Oct 18

01:30 AUD Monetary Policy Meeting Minutes

03:00 CNY GDP

Wed Oct 19

07:00 GBP CPI

Thu Oct 20

01:30 AUD Employment Change/Unemployment Rate

13:30 USD Philly Fed Manufacturing Index

Fri Oct 21

07:00 GBP 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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