Monthly Archives: August 2022

GBP On the data front, UK retail sales climbed last month on the back of demand for summer clothing and picnic food during the hot weather, but the record high inflation is masking a much larger drop in volumes. Retail sales increased by 2.3% in July, ending three consecutive months of decline. However, the figures are not adjusted for inflation, which the BRC said was running among its at highest since 2008 as the cost-of-living crisis continues to hit UK households. Sales improved in July as the heatwave boosted sales of hot weather essentials. Summer clothing, picnic treats, and electric fans all benefited from the record temperatures as consumers made the most of the sunshine. USD In the US, the key release of the week will be tomorrow’s update for CPI inflation. Ahead of that, today’s releases are forecast to show a big fall in productivity in Q2, due to the combination of falling GDP and strong employment and a resulting large rise in unit labour costs. Meanwhile, the NFIB small business survey for July may provide insights into trends in a key segment of the economy. EUR Currency-wise, the action was uneventful against the backdrop of a sparse data calendar. This was evident in the majors being confined to narrow trading ranges throughout the day. This pattern has continued in overnight trading. Of the limited action to register, the euro has managed to edge slightly higher over the past 24 hours.

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 The Bank of England on Thursday predicted that the U.K. will fall into a recession in the final quarter of this year as it announced its steepest rate hike in nearly three decades, following similar moves by the central banks of the Eurozone and the U.S. as all of them attempt to clampdown on runaway inflation. The Bank of England raised interest rates by 50 basis points its sharpest hike in 27 years to 1.75%. The central bank also warned that inflation in the U.K. could rise to 13% by the end of the year, worsening the country’s already severe cost of living crisis. Following yesterday’s decision to step up the pace of monetary policy tightening, with the BoE deciding to raise the Bank Rate by half a percentage point, markets will be watching today’s event for clues over whether the next meeting on September 15th could see a similar move. USD Today, the US labour market report for July is due. Payrolls, which have been growing at a robust pace of 450k on average so far this year are forecast to rise by 250k in July. Meanwhile, the unemployment rate is projected to be unchanged at 3.6%. Barring any major surprise though, the data may not impact the dollar. In his press conference following the US central bank’s latest decision to raise interest rates, Fed Chair Powell described the labour market as still strong and played down the significance of recent rises in jobless claims. EUR Inflation still rising across European countries due primarily to rising energy prices. Inflation in the euro area was up to an all-time high of 8.9% in July 2022, with energy prices up more than 39% year-on-year. Estonia, Latvia, and Lithuania are the European countries with the highest inflation due to a heavy reliance on foreign imports for energy.

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

Today, we have the Bank of England policy announcement where there is a huge expectation that interest rates will be hiked by 50bps – its biggest rate hike in 27 years. The bank is expected to raise the rate by half a percentage point to 1.75 per cent in a bid to combat the 40-year high inflation. Markets have fully priced in a double rate hike, therefore anything less than this could see a GBP sell-off causing the pound to decline against most major counterparties. Should we see the Bank of England deliver on its 50bps hike, we may see a brief spike in the pound.

USD

A key measure of U.S. inflationary developments adds to evidence a peak in inflation is nearing, weighing on the Dollar at the start of August.

EUR

ISM prices index dropped to 60 in July from 78.5 in June, the market was looking for a more robust 74.3.

This is the index’s lowest reading since August 2020 and indicates the price pipeline is cooling.

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

The Bank of England’s Monetary Policy Committee is expected to announce another interest rate rise before releasing its latest inflation and economic growth forecasts.

The Pound has firmed against both the Euro and U.S. Dollar through the latter part of July and early August and the currency’s big test comes with the size of the hike announced and the shape of those forecasts.

Rates are expected to rise again, by 0.25% or 0.5%, increasing costs for millions of borrowers.

USD

Turning to the day ahead, the main release of note will be the latest US non-manufacturing ISM.
 
The consensus is for the index to move lower to 53.5 in July from 55.3 previously. In the Eurozone, retail sales are forecast to stagnate in June, as inflation continues to weigh on disposable incomes.

EUR

The euro was on the defensive as investors pared back their rate hike expectations in the Euro-area once again.

 The deposit rate is now seen as rising to near 1% by year-end and remaining in and around that level throughout 2023.

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

The British Pound started August with solid gains against both the Euro and Dollar but risks decline later this week as the Bank of England faces one of its toughest-ever interest rate decisions as the UK heads toward recession

The Bank of England will deliver its latest interest rate decision on Thursday against a backdrop of soaring prices and multiple warning signs that the UK is heading for a recession this year.

Rates are expected to rise again, by 0.25% or 0.5%, increasing costs for millions of borrowers

That gives the nine members of the Monetary Policy Committee a tougher job than perhaps any time since Gordon Brown made the bank independent of government in 1997.

USD

There are no major data releases today. However, in the US the June JOLTS survey of job openings and labour market turnover will provide further detail on employment trends.

The main monthly report for June that was released a few weeks ago showed employment growth slowing but overall, the message seemed to be that the labour market is still tight.

Meanwhile, US Federal Reserve policymakers at the back end of last week cited the economy is not in recession despite confirmation GDP fell in the first half of 2022. They also remain concerned that labour market tightness may further fuel wage growth.

EUR

Eurozone unemployment remained stable at 6.6% during the month of June 2022 compared with the previous month, the EU’s statistical office Eurostat announced yesterday.

It has decreased by 1.3% compared to last year’s unemployment level as people go back to work after job losses during the COVID-19 pandemic.

The rates differ per EU country. Unemployment was highest in Spain and Greece at 12.6% and 12.3% respectively. The Czech Republic has the lowest unemployment rate in the EU at 2.4%.

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