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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Sterling, UK, Uncategorised
• August 14, 2023
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After positive UK GDP data, the Pound traded a little higher on Friday after a relatively disappointing performance over the week- the data showed that the UK economy has in fact still grown a little through this current cost of living crisis- for those of you in the UK this probably came as no surprises as the shopping centres etc are still extremely busy here- which is good news for the UK.

This week we have a pretty busy week on the data front- beginning on Tuesday with UK employment figures- we are expecting the unemployment rate to stay unchanged at 4% and employment change to drop to 50k- alongside higher average earnings. The labour market in the UK is still strong clearly which supports higher interest rates for longer and higher cost of living (On the numbers)- if we see this data release as positive as expected then we can forecast a stronger Pound through Tuesday. Following this data we will have ZEW economic sentiment data out of the Eurozone and Germany, where we are expecting a negative number- though this is just a survey it does hold weight in regards to market sentiment.On Tuesday afternoon we also have U.S Retail sales where we expect to see a positive figure which will be good for the U.S economy, but may support a weaker Dollar.

On Wednesday we have the RBNZ interest rate decision where the expectation is that they will keep rates on hold, any change from this will affect the NZD in a big way, especially with most Central Banks choosing to keep rates stable for now. At 7am we have UK inflation numbers, where we are expecting to see a release at 6.8% (Lower than previous) which is good news for the UK, but bad news for the Pound. Inflation slowing down means that the BoE will be under less pressure to raise rates, which makes the UK unattractive from an investment standpoint, and therefore the Pound will weaken if we see this lower inflation figure- so for those of you waiting for the Pound to drop, Wednesday morning could be a good time for you. Later on Wednesday we have GDP numbers out of Europe which are expected to come out at 0.3% which would be an improvement, so this is another reason why we could see GBPEUR lower on Wednesday if these releases come out as expected. On Wednesday evening we have the FOMC minutes being released which will be important as the last Fed meeting there was a signal that rate hikes will now be data dependent and maybe pause for now- these minutes will paint the picture slightly better and help with future forecasting surrounding the US Dollar. Thursday’s key data release is U.S jobless claims which are expected pretty high at 1700K which is revealing a slowing labour market in the U.S- and on Friday we have UK retail sales and inflation numbers out of Europe- the UK retail sales are expected negative- and I am personally expecting a slightly improved number to forecast- and EUR inflation to release unchanged at 5.5% which could support more rate hikes.