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UK: Weekly FX Market Update 18 September

CalendarSeptember 18, 2023
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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

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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