Tag Archives: USD

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The economy shrinks by 0.1% in Q2

GBP

The British Pound was supported near recent levels against both the Euro and Dollar this morning following the release of some better-than-expected UK GDP data that suggests The UK’s economy contracted by 0.1% in the second quarter.

In June, GDP fell by 0.6%, services fell by 0.5%, manufacturing by 1.6% and construction by 1.4%, the Office for National Statistics reported.

Nevertheless, the UK’s economic performance was worse in the second quarter than that of nations like Canada, Italy, France, and Germany, with underlying data showing that economic pressures were beginning to take hold on consumer spending.

USD

The past few days have seen some welcome news on the US inflation front. Most notably, on Wednesday, the latest US CPI print, saw the headline rate drop from 9.1% in June to 8.5% in July, softer than market expectations of a fall to 8.7%.

Later this afternoon, the University of Michigan will be releasing its preliminary estimate for July US consumer sentiment, which is forecasted to show a modest improvement from 51.5 in July to 52.0 The report will also provide a gauge on US consumers’ expectations for inflation 1yr ahead and 5-10yrs ahead.

EUR

In the eurozone, the latest industrial production report is due this morning. Already released regional reports from Spain, Italy, Germany and France have been better than expected and point to upside risks to the market consensus expectation of a 0.2% rise.

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Dollar Softer following easing in US inflation.

GBP

Today, The UK ministers will meet major energy firms amid a deepening energy crisis.

Chancellor Nadhim Zahawi and Business Secretary Kwasi Kwarteng will press gas and electricity company executives for solutions to the predicted spike in bills over winter.

The Bank of England expects a longer-lasting recession from the end of the year.

Rising energy costs are a key reason for the BoE’s significant upward revision of its inflation forecast. The BoE expects to get inflation back under control. However, everything depends on how the energy crisis in Europe develops.

USD

The key focus for markets yesterday was the US CPI inflation report for July. The data produced some surprises and generated a reaction across a number of markets.

The US inflation news coincided with some Dollar weakness. The greenback fell by over 1% in the immediate aftermath of the data release. However, it has recovered some ground overnight.

EUR

Nine Russian warplanes were destroyed in a deadly string of explosions at an air base in Crimea that appeared to be the result of a Ukrainian attack.

The destruction of Russian military aircraft in such numbers would represent a significant escalation in the war.

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.
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British pound under pressure

GBP

The British Pound has been under pressure against the Euro for a few days now which may see further downside near term.

Although the Pound has remained relatively steady against the Dollar over recent days it has fallen 0.30% against the Euro this week, adding to last week’s 0.45% fall.

British consumer confidence inched up in July after seven straight months of decline, possibly reflecting the introduction of support payments for low-income households.

Today’s survey comes days after the Bank of England said Britain would enter a recession at the end of 2022 and gave a grimmer outlook for inflation, projecting consumer prices would rise more than 13% in October.

UDS

Today’s July US CPI report will attract a lot of attention, particularly after last Friday’s strong labour market report for July, which confounded expectations that the economy is already in recession. 
Fed policymakers have said that they are looking for compelling evidence that inflationary pressures are easing before they change course on monetary policy.

However, this outcome would seemingly support the comments from officials that a further interest rate rise of at least 50 basis points is likely at their next policy update in September.

EUR

Last week, the European Union faced a new crisis when it was revealed eurozone inflation had skyrocketed to a record high, piling yet more pressure on the ECB as surging prices show no sign of slowing.

In July, eurozone inflation jumped to 8.9 per cent, up from 8.6 per cent in June and 8.1 per cent in May. The ECB has forecasted the rate to average 6.8 per cent in 2022 before falling to 3.5 per cent in 2023 and 2.1 per cent in 2024.

The Russian gas crisis has been a key factor, with supplies into Europe via the Nord Stream 1 pipeline shrinking and price pressures seeing growth in the German economy (the EU’s largest).

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.
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Majors being confined to narrow trading ranges

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.
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GBP/EUR hits 8-month low
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Markets await latest US jobs report

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.
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