Monthly Archives: September 2023

Currency-wise, the majors were confined to relatively narrow ranges. Sterling started the day on the defensive following weaker than expected UK GDP figures for July. 

Meanwhile, there was no major reaction from the dollar to the US inflation newsflow. The limited FX moves have continued in overnight trading. As a result, the main pairs open this morning broadly similar to 24 hours earlier. 

Attention today is on the ECB meeting, and markets are forecasting a 25-basis point hike. This follows EU inflation figures last month released high at 5.3% and someway off the ECB target inflation rate of 2%.

 ECB President Lagarde’s press conference is anticipated to cause volatility in the market as she voices her outlook on future movements.

Yesterday, the major currency pairs were restricted to very narrow ranges. This was not surprising given that, other from the 7 a.m. distribution of an accumulation of UK labour market data, the remainder of Tuesday’s macroeconomic diary was quiet.

Today’s macro calendar includes multiple significant updates. Indeed, the UK GDP data for July has been published this morning. The GDP fell by 0.5% in the month, falling short of forecasts for a 0.2% drop. Sterling is still on the defensive this morning because of the poor GDP figures.

We’ll have US CPI inflation figures for August later today. The data will be a major input into the Fed’s policy talks next week (September 19th/20th). The consensus anticipates that headline inflation will rise from 3.2% to 3.6%. Meanwhile, the core rate will be reduced from 4.7% to 4.3%.

The major currency pairs were firmly range bound. A shortage of data schedules is believed to have contributed to the slow pace price movement.

The yen gave back some of its gains earned before the European open, following hawkish remarks from Bank of Japan Governor Ueda over the weekend that it may consider removing its zero interest rate policy at the end of the year.

The UK labour market numbers for July were released this morning. The unemployment rate climbed to 4.3% from 4.2%, as expected. meanwhile, average wages were 8.5% higher year on year (vs. +8.2% year on year forecast). So far, the news has had no effect on sterling in early exchanges.

Later today, survey data for September, including the German ZEW and US small business optimism are due. However, barring any major surprises, the data are unlikely to impact on forex markets.

We begin the week with a quiet day in terms of economic data. 

In the Eurozone, the Sentix investor confidence survey is expected to have fallen to -20.0 in September from -18.9 in August.

Tomorrow morning, we have the UK retail sales report for August ahead of the ‘official’ ONS release on the 22nd. Last month, both the ONS and BRC noted that poor weather had weighed on July retail sales and commentators will be watching for signs of a rebound in activity in August in the latest release.

Also of interest, will be Wednesday’s appearance of the Bank of England’s MPC members before Parliaments Treasury select Committee where they will be grilled on the latest developments concerning UK inflation and interest rates.

The pound continues to look well supported heading into the week not losing any gains over the weekend against the euro.

Lastly, of interest will be the Thursdays release of the Eurozone GDP for the second quarter, where a small increase of 0.3 percent is expected to be announced. 

In terms of data, US core-PCE inflation increased to 4.2% in July, up from 4.1% in June, as expected. However, the monthly growth was only 0.2% for the second month in a row.

 In the Eurozone, headline inflation remained at 5.3% in August (vs. 5.1% expected), but core inflation also decreased to 5.3%, in line with forecasts. Market rate expectations have weakened as a result of less aggressive central bank language and good inflation data.

The August labour market data for the United States will be published today. Nonfarm payrolls in the United States are predicted to be 170k, the lowest level since December 2020. The unemployment rate in the United States is expected to remain unchanged at 3.5%.

The release is expected to demonstrate that the pace of payroll growth has slowed even further. The data create some event risk for US interest rates and the USD.