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UK: Weekly FX Market Update 7 August

CalendarAugust 7, 2023
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GBP

  • The Bank of England (BoE) raised rates by 0.25%, the general consensus prior to the decision.

  • Governor Bailey stated that ‘We will ensure that the Bank rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainable in the medium-term’.

  • Chancellor Hunt repeated that the BoE has forecasted inflation below 3% in August 2024, without the economy falling into recession.

  • Will this stance result in higher rates for longer for the UK? Or will weak growth, turn into recession and push the pound lower?

  • This week, BRC Retail Sales are due out Tuesday morning.

  • UK GDP is released on Friday, in what could be the most significant data point of a quiet week.

EUR

  • Two weeks ago, ECB President Lagarde stated that the ECB will be ‘data dependent’ when choosing whether to hike or a pause next month.

  • Recent Eurozone PMI data points to a weaker economy ahead, whilst Eurozone retail sales fell by 0.3% monthly, rather than the 0.3% growth expected. Does this now point to keeping rates on hold in September?

  • Investor confidence is released on Monday, will it slide lower in unison with the above?

USD

  • In July, after US Non-Farm Payrolls were released, the US dollar weakened by 3.5% against the Euro and 3% against the pound.

  • Last Friday’s employment data showed a slightly slowing labour market, adding 187k jobs, short of the 200k expected. Could this eliminate the need for more US rate hikes, weakening the dollar again?

  • Could US CPI, due for release on Wednesday, keep the pressure on the Fed to hike rates once more this year?

  • FOMC members Harker and Bowman will share their thoughts on the economy on Monday, and Consumer Sentiment finishes the week on Friday.

Main events for this week:

Mon Aug 7

All Day CAD Bank Holiday

09:30 EUR Sentix Investor Confidence

13:15 USD FOMC Harker/Bowman Speak

17:00 GBP PMC Pill Speaks

Tue Aug 8

00:01 GBP BRC Retail Sales

02:30 AUD NAB Business Confidence

13:30 USD Trade Balance

Wed Aug 9

04:00 NZD Inflation Expectations

Thu Aug 10

13:30 USD CPI

Fri Aug 11

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

13:30 USD Producer Price Index

15:00 USD Prelim UoM Consumer Sentiment

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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