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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• October 30, 2023
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The Pound has struggled to maintain any form of strength against the Euro and Dollar over the last month, with GBPEUR currently trading at 1.1450 and GBPUSD trading at 1.2130. After a dovish ECB meeting last week we saw the Euro weaken across the board, with recession expected for the Eurozone over the next few quarters- however the Pound was unable to capitalise on this weakness and the pair stayed lower after the decision. The GBPUSD price has been gradually falling with legs to continue in my opinion, we have already seen lows of 1.2030 in October.

As we move into a new week and new month- we have a pretty busy calendar from a data perspective- We have the FOMC, BoJ, BoE and Norges Bank decisions- across all of these we are not expecting any further hikes (potentially a small chance the BoE does 0.25%)- however after recent data releases I think it would be prudent for most Central Banks to keep rates on hold. The key element we are following now is how many members are voting for cuts- if we see at least one member in each vote for a cut, then it at least begins discussions around when cuts are feasible on interest rates- the reality is no time soon, but a year goes very quickly, and with next year being an election year in a few countries, interest rates and inflation will be key on the voting manifesto.

In regards to general data releases- we have Germany GDP out on Monday, this is important as Germany makes up 40% of the Eurozone economy, so if we see a contraction here, it will give us an idea of what to expect from the whole Eurozone- later we have Eurozone consumer confidence which is also expected lower- so all in all Monday is not set to be a great day for the Euro.

On Tuesday we have European Core inflation data, expected to come out lower at 4.2%, this is good for Europe but will weaken the Euro as falling inflation means interest rates will not go up further, we also have the BoJ interest rate decision where rates are set to be on hold but we await any information about any intervention on the currency markets due to current JPY weakness.

On Wednesday we have U.S Manufacturing data and the Fed interest rate decision, again, no change expected however markets will be awaiting Powell’s speech to get forward guidance, I suspect messaging will be the same that rates will be higher for longer and no change expected over the next quarter.

On Thursday we have German unemployment data, the Norges Interest rate decision and the BoE- Thursday could be a very volatile day if trading GBP or NOK, alongside U.S jobless claims data later that afternoon. Finally, on Friday we have U.S Non farm payrolls, we are expecting to see a lot less jobs added which could weaken the Dollar, however as always with NFP’s, never take the prediction for granted as we usually see the opposite happen.