Category Archives: FX News

GBP

The British Pound is currently stronger against the Dollar, Euro and other currencies as we reach the final week of July.

The Bank of England’s Monetary Policy Committee (MPC) must decide next week whether to speed up the pace of interest rate rises with a rare half-point rate rise to tackle the highest inflation in 40 years.

Surging inflation has driven consumer sentiment to its lowest since records began in the 1970s, but business activity has been slower to weaken.

USD

However, there is a busier schedule in the US. House prices (May), new home sales (June) and the Conference Board measure of consumer confidence (July) are all due to release.  

US new home sales data are expected to show a further slowdown in the housing market as interest rates increase. Also of interest is the Conference Board’s consumer confidence survey. Last month’s confidence fell to a 16-month low of 98.7, led by increasing concerns about inflation.

EUR

The main release of note yesterday was the German Ifo survey of business sentiment for July. Similar to last Friday’s PMI data, it missed the downside of expectations as well as being consistent with a slowdown in the Eurozone’s largest economy.

The headline reading fell to its lowest level since June 2020. The underlying data showed that the weakening in activity was broad-based across the key sectors of the economy.

There are no major Eurozone data releases today. Early tomorrow morning’s German and French consumer confidence reports are expected to show further declines.

EU energy ministers are scheduled to meet today to try and come to an agreement over measures in response to a potential energy crisis this winter.

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 Pound to Euro exchange rate has been contained within a narrow range and could remain so this week unless European inflation data surprises notably on the upside, or GDP to the downside, of expectations this Friday.

The two remaining candidates in the Conservative leadership contest to be the next PM, Rishi Sunak and Liz Truss, will face each other in a televised debate later today.

USD

This Weeks attention will be on the US Fed Meeting, which poses some event risks for the dollar. Interest rate differentials have been a key driver of the dollar’s recent strength. The Fed is expected to announce another 75bps rate hike.

EUR

The outlook for European economies has weakened considerably in recent months. The flash purchasing managers indices for July released today confirm that Europe is probably heading for a recession.

The German IFO survey will be closely watched as usual for the latest gauge of business sentiment in the Eurozone’s biggest economy. Last month’s headline business climate index fall was led by a particularly large drop in the forward-looking expectations component.

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

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.