UK: Weekly FX Market Update 4 September

GBP

• GBPUSD break lower again on Friday afternoon after data showed that the US added more jobs than expected in August, strengthening the dollar.

• However, despite the USD strength, the data also showed that the unemployment rate jumped from 3.5% to 3.8%, though the market chose to overlook this.

• In other news, Bank of England Economist Pill continued his hawkish rhetoric, saying he wanted UK interest rates to be the same shape as ‘Table Mountain’. The idea of rates staying where they are for a sustained period of time before falling, failed to have an impact on the markets, though the intention should be noted.

• Will a US holiday shortened week continue to provide volatility?

• If US data continues to soften can its peers take advantage, or will the spectre of stagflation push the pound and euro lower?

EUR

• ECB July meeting minutes surprisingly noted that initially there was a preference to hold interest rates, before policymakers eventually decided on a 0.25% hike.

• ECB member Villeroy says the ‘interest rate peak is close’.

• Eurozone CPI continues to stall around the 5% level. Will this stubborn inflation force the ECB to hike rates in September , somewhat ‘against their will’?

• Or will the vote for holding, take hold?

USD

• US Non-farm payrolls provided a mixed bag with the July number being downgraded, whilst August was better than expected. US unemployment data disappointed.

• Fed Chair Powell had said that if GDP continued to grow quickly, and the labour market remained tight, the Fed could hike rates again. However, US GDP last week was released at 2.1%, lower than the 2.5% expected.

• Dutch bank ING suggested no rate hikes from the Fed in September or November – could this be a catalyst for a weaker dollar in Q4?

• The US is on Labor day holiday Monday this week.

• What will Unemployment claims show on Thursday?

Main events for this week:

Mon Sep 4

All Day US bank holiday

Tue Sep 5

05:30 AUD Reserve Bank of Australia (RBA) interest rate decision/Statement

Wed Sep 6

02:30 AUD GDP

15:00 CAD Bank of Canada interest rate decision/Statement

15:00 USD ISM Services PMI

Thu Sep 7

04:10 RBA Gov Lowe speaks

13:30 USD Unemployment claims

Fri Sep 8

07:00 EUR German Final CPI

13:30 CAD Employment change