Monthly Archives: July 2022

GBP

British retail sales edged down in June as drivers cut back on record-priced fuel, with consumers reducing shopping less than expected, data showed, though the trend remained weak as households struggled with surging inflation.

UK retail sales fell 0.1% month-on-month in June, which is stronger than the -0.3% reading the market was looking for and an improvement from the -0.8% recorded in May.

The figures mean sales were down 5.8% in the year to June, coming in softer than the -5.3% the market was anticipating.

USD

US dollar languished near its lowest level since July 6 amid diminishing odds for a more aggressive rate hike by the Federal Reserve later this month.

Several FOMC members signalled last week that they will likely stick to a 75 bps rate increase at the upcoming policy meeting on July 26-27.

EUR

Christine Lagarde brought the era of negative European interest rates to an end with the biggest rise in more than two decades on Thursday, in a move that failed to calm market panic over a looming crisis in Italy.

The central bank raised rates by more than anticipated, opting for a 50bps increase, bringing an end to the negative interest rates regime in the Eurozone.

The euro initially climbed following the announcement but dropped again after Ms Lagarde was criticised for providing little detail on future rate hikes. Doubts also grew over the new bond-buying programme announced by the bank (ECB).

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.

GBP

We are down to the final two candidates in the Conservative leadership contest following yesterday’s Fifth round of voting by Tory MPS. Rishi Sunak maintained his record of coming first in the poll, with 137 MPs backing him.

Penny Mordaunt had been the second-placed candidate for the previous four votes. But she fell at the final hurdle as MPs rallied behind Liz Truss, who received 113 votes, just eight more than Mordaunt.

The winner of the leadership race will be announced on 5 September, with Boris Johnson in charge until then.

USD

The latest weekly jobless claims will provide a timely insight into the state of the US labour market ahead of next week’s Federal Reserve monetary policy update.

The Fed remains concerned that a tight labour market could further fuel wage growth. The June monthly NFP report showed little sign of those pressures easing.

However, since then, the weekly jobless reports have moved upwards. They are still low by historic standards, but the recent turnaround is nevertheless tentative evidence that the jobs market may be softening. 

EUR

Today, all eyes will be on the European Central Bank which is expected to raise interest rates for the first time since 2011.

The ECB has signalled its intention to raise rates today and at forthcoming meetings. A hike of 25bp is expected. However, in recent days speculation has increased that the ECB may consider a larger move of 50bps.

The market will be paying close attention to any update to the ECB’s forward guidance on rates. The event poses some key event risks for the euro.

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision making during this difficult time to help you protect your profits.

GBP

Conservative MPs will vote again on Tuesday as they continue the process of choosing the two candidates for a leader who will be put to a vote of members.

One of the four remaining contenders – Rishi Sunak, Penny Mordaunt, Liz Truss, and Kemi Badenoch will be eliminated when the result is announced later.

Senior backbencher Tom Tugendhat was knocked out after Monday’s vote of MPs.

Already today, UK labour market data for May has been released. The unemployment rate remained at 3.8% in May. Meanwhile, underlying average earnings rose by 4.3% y/y, matching forecasts. The data has not affected the sterling in early trading

USD

The Dollar has been supported ever since last Wednesday’s U.S. inflation print of 9.1%, which was higher than anticipated.

This immediately raised bets the Federal Reserve would be required to accelerate the pace it raises interest rates to slow the economy and cool inflation.

EUR

Euro exchange rates face the prospect of a highly volatile few days of trading as this week contains a mix of the European Central Bank’s policy meeting as well as the planned restart date for the Nord Stream 1 gas pipeline.

The ECB rate decision certainly has the potential to move the Euro, but the expected interest rate rise of a 50bp hike is larger than the market’s currently anticipated 25bp and suggests the ECB is keen to make a rapid start on normalising interest rates.

The wild card for currency markets, therefore, is whether or not Nord Stream 1 is restarted, given it remains Russia’s geopolitical trump card.

GBP

Last week saw the Sterling climbing to its highest level against the Euro for more than two months as the single currency slipped below parity against the Dollar and the Pound benefited briefly from UK GDP data that came in much stronger than markets anticipated.

The Pound to Euro exchange rate has retreated from near two-month highs and could potentially fall further this week if all goes well for the European Central Bank (ECB) later this week.

USD

The dollar remained very much in the ascendancy on currency markets last week. Its position of dominance stems from favourable interest rate differentials, with the Fed well ahead of the other main central banks in terms of rate hikes and hawkish guidance.

EUR

Looking to the week ahead, given the significant role that interest rate differentials are playing on FX markets, Thursday’s ECB meeting poses some key event risks for the euro.

The ECB has guided a 25bps rate hike, which would represent its first rate rise since 2011. The market, in terms of pricing expectations, has not ruled out a 50bps hike and sees rates getting to 1% by year-end.

However, if the ECB fails to convince markets that significant rate hikes are on the cards, we could see the euro come under further downward pressure. 

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.

GBP

Yesterday saw Rishi Sunak secure the most votes in the second round of voting among Tory MPs with 101 votes, with Penny Mordaunt coming second.

Trade Minister Penny Mordaunt comes second with 83 votes, while Foreign Secretary Liz Truss places third again with 64.

Attorney General Suella Braverman finished last and was eliminated from the contest.

USD

Financial markets’ attention will continue to be fixated on the US where a barrage of fresh economic data releases is due today.

Forecasts are expecting headline sales to bounce back at a month-on-month pace of 0.8% following the 0.3% dip seen in May.

Some of the other US economic reports that will be published today include a preliminary reading on consumer confidence and inflation expectations for July, as well as import price and industrial production data for June.

EUR

The latest economic forecast released by the European Commission offers a pessimistic outlook of the times that lie ahead: prices in the eurozone will climb an average of 7.6% in 2022, while the whole EU will see a stronger surge of 8.3%

inflation across the European Union will remain extraordinarily high for the remaining of the year, keeping households and companies under long-term financial strain.

Italy’s president rejected the resignation of Prime Minister Mario Draghi yesterday after a day of political drama that threatened to bring down a national unity government that has been in office less than 18 months.

Draghi, the former European Central Bank (ECB) president, announced he was to resign yesterday after the 5-Star Movement, a coalition party, failed to back him in a confidence vote over his plan to combat soaring prices.

If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.