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Market Update

• Posted by currencies in Bank of England, Dollar, EUR, GBP, Sterling, UK, Uncategorised
• September 20, 2023
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The euro got a lift this morning from a report that indicated the European Central Bank may soon start discussing how to drain some of the excess liquidity in the banking system, whilst also the latest inflation data shows annual inflation has come in lower than expected at 5.2% for August, down from 5.3% in July, according to latest data from the statistical office of the European Union.
 
August inflation was expected to come in at 5.3%. However, the figure is still substantially above the European Central Bank’s (ECB) 2% medium term inflation target.
 
The euro had been gradually losing steam over the last two months, since hitting a 15-month high, as the ECB has neared the end of its current cycle of rate rises. According to the most recent weekly data from the U.S. regulator, speculators have cut their bullish position in the euro to the smallest in 10 months.
 
This week brings a raft of central bank meetings, including those of the Federal Reserve, the Bank of Japan, the Bank of England, and the Swiss National Bank, among others, which kept currency volatility on the subdued side.
 
Money markets expect the Fed to keep rates on hold at its upcoming meeting, according to the CME FedWatch tool, though focus will be on the central bank’s forward guidance.
 
Sterling was flat this morning, ahead of an interest rate decision from the BoE on Thursday.
 
The Bank is expected to deliver another rate hike on Thursday, but this could be its last for now, as a cooling economy has policymakers unsettled.