UK: Weekly FX Market Update 6 March

GBP

• The Windsor agreement gave the pound a helping hand, though limited.

• Whilst the agreement has political gravitas, it doesn’t change the overall trading relationship between the UK and EU.

• Bank of England Governor Bailey put the dampers on the inflation hawks and the pound, cautioning against expecting rates moving ‘either way’.

This Friday we have the release of UK GDP, Manufacturing Production and the Goods Trade Balance for direction. The UK narrowly missed a technical recession when the last quarters GDP reading was zero. Will the Q4 reading show that the UK is back to growth mode, or was that a lucky escape and will it weaken the pound?

EUR

• GBPEUR fell as the German CPI hit 9.3% annually.

• Eurozone Core CPI was expected to be steady at 5.3% but instead jumped up to 5.6%, providing further reasoning for a more hawkish ECB.

• ECB President Lagarde said that it was ‘impossible’ to say how high rates need to go, more support for a potentially bullish Euro.

ECB Board member Wunsch said that he sees 4% interest rates are possible if inflation stays high.

Eurozone Retail Sales are released today and GDP is out on Wednesday

USD

• The US$ traded within its recent ranges last week following what was a quiet data week.

• Fed’s Waller said that the FOMC may need to raise rates beyond December’s the expected central view.

• Fed Chair Powell testifies twice to Congress this week. Will he step up the hawkish rhetoric?

Non-Farm Payrolls are released on Friday, following a strong print last month. Could the number of new jobs added to the market exceed this months expected 215k? Will this force both GBPUSD and EURUSD lower than the recent range?

Events for the weekend ahead:

Mon Mar 6

09:30 GBP Construction PMI

10:00 EUR Retail Sales

Tue Mar 7

00:30 AUD Retail Sales

00:31 CNY US$ Trade Balance

03:30 AUD RBA Cash Rate Decision

15:00 USD Fed Chair Powell Testifies in the Senate

21:55 AUD RBA Gov Lowe Speaks

Wed Mar 8

09:30 GBP MPC Dhingra Speaks

10:00 ECB Lagarde Speaks/Revised GDP

13:30 USD Trade Balance

15:00 CAD Bank of Canada Overnight Rate Decision

15:00 USD Fed Chair Powell Testifies in the House

Thu Mar 9

15:00 USD FOMC Barr Speaks

Fri Mar 10

00:01 JPY BoJ Interest rate Decision/Press Conference

07:00 GBP GDP/Industrial Production/Manufacturing Production/Goods Trade Balance

13:30 CAD Employment Data

13:30 USD Non-Farm Payrolls/Average Hourly Earnings/Unemployment Rate