UK: Weekly FX Market Update 18 September
GBP
Sterling struggled last week after monthly UK GDP fell 0.5%.
The Bank of England (BoE) sets interest rates on Thursday with Bloomberg giving a 0.25% rate hike given a 70% chance of occurring.
Retail sales are released on Thursday, whilst Friday sees important PMI data announced.
Is the pound set for further weakness or will it manage to bounce on rate hike expectations?
EUR
A week of woe for the Euro last week as the European Central Bank (ECB) increased its inflation forecasts while decreasing its growth forecasts.
EURUSD traded at a new 3-month low, despite another 0.25% rate hike.
The ECB hiked rates with President Lagarde stating that interest rates will now make a ‘substantial contribution’ to reducing inflation, with the market interpreting that the ECB sees the last hike as being ‘enough’.
Bloomberg is now pricing in 0.75% of rate cuts for 2024. Has the market got ahead of itself?
Eurozone final CPI is released on Tuesday and PMI data on Friday.
PMI releases the past two months have encouraged EURUSD weakness. Will this happen again?
USD
While the UK and Eurozone struggle, the US economy hums along nicely with monthly retail sales growing 0.6%.
The Fed warned that fast growth and a tight labour market could force it to hike rates.
However, Treasury Secretary Yellen talks of a soft landing, and neither growth at 2.1% nor unemployment rising to 3.8%, would seem to warrant action.
The Fed sets interest rates on Wednesday, will they look to keep rates on hold?
Main events for this week:
Mon Sep 18
No first tier data
Tue Sep 19
09:00 EUR Current account
10:00 EUR Final CPI
13:30 CAD CPI
13:30 USD Building permits
Wed Sep 20
07:00 GBP CPI
19:00 USD FOMC Interest rate decision
19:30 USD FOMC press conference
Thu Sep 21
08:30 CHF SNB Interest rate decision
12:00 GBP BoE Interest rate decision
13:30 USD Unemployment claims/Current account
Fri Sep 22
05:00 JPY BoJ Interest rate decision
06:30 JPY BoJ press conference
07:00 GBP Retail sales
09:00 EUR Flash manufacturing and services PMI
09:30 GBP Flash manufacturing and services PMI
14:45 USD Flash manufacturing and services PMI