Tag Archives: GBPnews

A quiet start to the week with only the NY Fed Empire State Survey due.

The focus this week will be both the US fed policy announcement and the Bank of England policy announcement on Thursday.

It is widely expected the Bank of England will leave the headline rate at 5 percent, but it will be the comments that follow that will garner a lot of attention.

Before the Bank of England policy announcement on Thursday, we have the UK inflation figures on Wednesday.

If UK inflation comes in lower than expected, we could see the pound weaken off slightly.

Wednesday is a big day for markets, as we will see the Federal Reserve finally cut interest rates and likely signal that there are more to come.

On Friday, we have the UK Retail Sales figures due followed by the EU consumer confidence numbers to cap off a busy week.

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Global market stability helped the Pound Sterling hold off Euro strength following the European Central Bank’s (ECB) decision to decrease interest rates by 25 basis points to 3.50% yesterday. The decision had been anticipated and unanimous, resulting in it having little impact on the Euro.

The comments and revised forecasts were positive for the Euro because they did not encourage markets to speculate that the ECB would accelerate the pace of rate cuts. If it had been the case, euro exchange rates would have fallen.

On the other hand, if ECB President Christine Lagarde had fought back firmly against current forecasts of more than one 25 basis point rate decrease in the remainder of 2024, the Euro would have surged.

Looking ahead, Eurozone industrial output is expected to fall by 0.5% in August. In the United States, the initial reading of consumer sentiment is expected to improve modestly in September. However, neither release is anticipated to have a significant impact on the FX markets.

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The risk-averse sentiment extended to currencies, with classic safe havens like the yen and Swiss franc gaining traction.

However, the dollar’s rise was limited by a lowering of US market rate expectations. Against this context, EUR/USD and GBP/USD traded in extremely narrow ranges yesterday.

This morning, the monthly reading of UK GDP for July was announced. The statistics came in below expectations, with output flatlining for the month compared to projections of a 0.2% month-on-month increase.

Pound sterling expressed frustration with the news that the economy did not grow in July.This means that the economy has failed to grow for two months in a succession, raising concerns about the UK’s growth outperformance compared to the Eurozone.

Later today, the spotlight will be on US CPI inflation in August. The headline rate is predicted to dip to 2.6% from 2.9%, with the core rate remaining at 3.2%. The release creates some event risk for the dollar.

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Already released this morning, the UK Office for National Statistics issued labour market data.

The employment data reported was varied, the number of new unemployment claims rose by 23.7 thousand in August, which is significantly better than the previous release of 135 thousand claims during July.

Furthermore, data showed that the unemployment rate dropped in line with the market consensus to 4.1 percent (previous 4.2%).

Lastly, official statistics published that average wages in Britain, rose by 4 percent against the market expectation of 4.1 percent – UK wages are at their lowest level this year.

Pound Sterling has been supported by the early release of employment data, moving up against the other currencies in the G10.

Later on this week, the Euro will be tested as markets await the European Central Bank’s monetary policy decision. The ECB is widely expected to cut interest rate after slowing economic growth and weakening inflationary pressures.

Investors are pricing in the ECB to adjust its policy rate and cut interest rates by 25 basis points this month, future rate cuts will be determined by later Eurozone data.

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Investor sentiment remained cautious yesterday. Overall, markets were rather quiet, as markets prepare for today’s US labour market report.

Data-wise, the US non-manufacturing ISM rose to 51.5 in August, beating expectations of a drop to 51.1.

Meanwhile, the latest initial jobless claims totalled 227k (compared to 230k expected). ADP employment increased by only 99k in August, significantly below the consensus of 145k.

However, the link between ADP and government payroll statistics is rather poor. Against this backdrop, the dollar dropped following yesterday’s ADP data.

Looking ahead, the main attention will be on theUS jobs market report. Payrolls are expected to increase by 160k, while the unemployment rate is forecasted to fall to 4.2%.

The announcement provides some event risk for the dollar, as a negative report could boost market expectations for a 50 basis point rate decrease by the Fed later this month.

For additional insights on how this could affect your business or to capitalise on market volatility – please reach out to speak to one of our experts.