Market Update - What’s next?
Today’s rates:
GBP/USD 1.1800
GBP/EUR 1.1550
EUR/USD 1.0250
GBP/AUD 1.7900
GBP/USD 1.1800 GBP/EUR 1.1550 EUR/USD 1.0250 GBP/AUD 1.7900
Below we take a look at some daunting and important data which is released next week, with the possible implications on currencies.
EURO:
The single currency had a strong day yesterday and overnight, but markets remain ‘data dependent’ - consensus is for Eurozone Inflation to hit 11.2% year-on-year when published next Wednesday. The rise in the cost of living may vary across European nations, but with most nations printing around 10% and encountering economic headwinds, the Eurozone will have to endure some harsh months ahead.
German retail sales on Thursday are expected to show a continuing decline of around 1% year on year – quite something for the ‘economic powerhouse of Europe’.
USD:
The Fed will start signalling a tuning point in interest rates soon, as the market expects the rate of increase to slow down and to be given a time horizon for possible rate reductions. This evening’s release of Federal Reserve minutes will be enlightening to show the balance of arguments around trimming. The USD will react.
On this note, the Fed Chairman, Jerome Powell speaks next Wednesday evening and the market will hang on his every word for indications and hints of guidance on rates.
Despite this, data will be all-important – as such, next Wednesdays GDP data and Friday’s employment data will move the USD.
The USD has pulled back vs EUR from 0.9800 to 1.0300 and we have seen clients taking advantage, selling EUR to buy USD on this move.
GBP:
Brexit rears its head again as Prime Minister Sunak tells us that a Swiss-style EU Agreement is not something that he wants to pursue. This is at odds with the Chancellors more relaxed remarks about wanting to remove trade barriers with the EU.
Whatever talks are going on in the background, we are now being inundated with evidence that the UK is still suffering the consequences of Brexit, leaving growth forecasts at the bottom of European league tables.
With a lack of statistics being published next week, GBP might be at the mercy of other currencies. As the USD recedes, GBP/USD has regained a lot of ground, trading around 1.1800. GBP/EUR remains at the middle / lower end of recent ranges around 1.1500
AUD:
The central bank has not convinced the FX market of its actions and previously dovish statements yet, and Monday’s Retail Sales & Wednesday’s inflation data will be closely watched (AUD/USD at 0.6625 has benefitted from recent UASD weakness, near the top of 1month ranges).
China:
With Formula 1 announcing the removal of the Chinese GP from its calendar for 2023, headlines from China continue to be dominated by stories of lockdowns, new Covid-related deaths and the economic effects of zero-Covid policies. Wednesday’s manufacturing data is expected to show an increase from last month (49.3), but still not in expansionary zone.
