GBP
The Bank of England delivers its next policy decision on 4th August with a high probability of an outsized 50 basis point hike. However, whether this is followed up with a similar-sized hike in September is less certain.
Currently, markets are positioned for Bank rates to rise all the way to 3.0%, The tightness in UK labour markets that is generating wage increases should ease and inflation will likely fall rapidly in 2023.
USD
The big macro news today was that from the U.S. where the first estimate of the second quarter GDP confirmed the U.S. was in a recession.
Although the dollar fell against some currencies, it held its own relatively well against the euro and pound.
Looking ahead today, Core PCE inflation is expected to remain at 4.7% in June. US income and consumption data for June will also feature.
EUR
Annual Eurozone CPI inflation for July is expected to post a modest fall when compared to June.
That is primarily due to the fall in energy prices during the month. In contrast, the core measure is expected to pick up slightly an indication that inflationary pressures may be broadening out.
Eurozone recession fears have risen sharply this week amidst news of restricted Russian gas flows and fears of Eurozone-wide gas rationing this winter.
Germany, the Eurozone’s manufacturing powerhouse and the largest economy is particularly exposed to gas shortages and rationing is likely over the winter months.
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.