UK: Weekly FX Market Update 27 February
The pound had a mixed performance last week. Slipping 1% against the US$ but gaining 1% against the euro .
Good news was delivered by Citigroup, updating their UK inflation forecast, now expect UK inflation to fall to 2.3% in 9 months time.
MPC member Mann spoke in hawkish terms that monetary policy has been ‘insufficiently aggressive’.
MPC member Broadbent talks on Monday, whilst Pill and Mann speak on Tuesday.
Prime Minister Sunak is working hard to agree a deal with the EU to agree a new Northern Ireland protocol. If successful, Berenberg forecast that £100 billion of investment could be unleashed in the UK.
Can the PM make progress with the EU, giving the pound it’s first ‘political boost’ since he steadied the ship last October?
EURUSD has fallen 4% in February, this is despite the expectation that the ECB is preparing the market for a 0.5% rate hike in March.
Eurozone Headline CPI is still high, growing 8.6% annually, with core CPI 5.3% annually.
Eurozone CPI First Estimate is released on Thursday. Will it drop in line with the fall in gas prices?
The day before, Bundesbank President Nagel speaks, will he maintain his hawkish tones?
February has been a strong month for the US economy with positive jobs and Retail sales data.
Inflation was higher than expected in February, with CPI at 6.4% annually exceeding the 6.2% forecast. Personal Consumption Expenditure was at 5.4%, against a forecast of 5%.
US inflation (Personal Consumption Expenditure) exceeded expectations, with Bloomberg consequently reporting that the market has now priced in additional rate hikes.
This has encouraged US$ strength, with the US$ index jumping 4.5% so far this month.
The Fed is in a tricky situation as inflation rebounds higher, just as they were expected to hit their terminal rate.
Will the Fed hike rates in March, May and June as the market now expects? Can the USD continue to strengthen as it has throughout February?
Events for the weekend ahead:
Mon Feb 27
09:00 GBP MPC Broadbent Speaks
Tue Feb 28
04:10 JPY BoJ Gov Designate Ueda
12:15 GBP MPC Pill
12:30 GBP MPC Mann
13:30 CAD GDP
15:00 USD CB Consumer Confidence
19:30 USD FOMC Goolsbee Speaks
Wed Mar 1
00:30 AUD CPI/GDP
10:00 EUR BuBa President Nagel Speaks
Thu Mar 2
10:00 EUR CPI Flash Estimate
Fri Mar 3
00:00 USD Fed Monetary Policy Report
09:00 EUR Final Services PMI
09:30 GBP Final Services PMI
14:45 USD Final Services PMI
15:00 USD ISM Services PMI