UK: Weekly FX Market Update 27 August

GBP

• Sterling gained 2% against the US dollar and 1% against the euro last week.

• UK Purchasing Managers Index (PMI) data for manufacturing and service sectors were both firmly in expansion territory, unlike US and Eurozone PMI releases, which showed weak manufacturing and buoyant services data.

• Bank of England Governor Bailey spoke about the risks of persistent price pressures appearing to recede.

• However, will the expected 10% October increase in energy prices stop his plans to cut rates?

EUR

• France doesn’t have a government, but the market doesn’t seem to care.

• Could it be that US dollar weakness is pushing EURUSD higher?

• Will Eurozone CPI, due for release on Friday, show another decline?

• At Jackson Hole, ECB Board member Centeno said that a decision to cut rates on September 12th was ‘easy’ given the data on inflation and growth.

USD

• Fed Chair Powell was very clear about a September 18th rate cut. Speaking at Jackson Hole, he said 'The time has come for policy to adjust'. He also add that 'the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks’.

• Could unemployment now be the Fed’s focus after Powell said ‘we do not seek or welcome further cooling in labour market conditions’?

• US GDP is released on Thursday, whilst Core Personal Consumption Expenditure rounds the month and week off on Friday.

Main events for this week:

Mon Aug 26

All Day UK Bank Holiday

Tue Aug 27

06:00 JPY BoJ Core CPI

15:00 USD Consumer Confidence

Wed Aug 28

02:30 AUD CPI

Thu Aug 29

07:30 EUR German Prelim CPI

13:30 USD Prelim GDP/Unemployment Claims/Goods Trade Balance

Fri Aug 30

02:30 AUD Retail Sales

10:00 EUR CPI Flash estimate

13:30 CAD GDP

13:30 USD Core PCE Price Index

15:00 Revised UoM Consumer Sentiment/ Inflation Expectations