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Audere Research

Foreign Exchange Analysis ~ 08 July 2024


GB Pound

What happened last week?

↓ The pound appreciated against the dollar on the back of a historic landslide Labour victory on Thursday. Nevertheless, in comparison to recent UK elections, the volatility facing the pound was subdued as Labour’s victory was widely expected from the moment the snap election was called.

 

What to watch for in the short-term?

 Predictions of an August rate cut are on the rise with markets currently pricing in a 60% chance of a rate cut next month. In the near-term, speeches from BoE members Pill, Mann and Haskel this week could cement the August cut particularly if GDP comes in weaker than expected on Thursday.

 

What about the coming months?

 Looking ahead, markets will be keeping a keen eye on GDP to see if Labours pledges for economic growth transpire over the coming months.

 

Calendar

Friday 7am | GDP (Q1)


US Dollar

What happened last week?

The dollar depreciated last on the back of weakening manufacturing PMIs (48.5 vs 49.1 consensus). Nevertheless, the jobs report on Friday beat expectations with the nonfarm payrolls print coming in at 206k Vs 190k consensus.


What to watch for in the short-term?

 A busy week ahead in the economic calendar for the US could lead to EURUSD volatility with CPI data on Thursday. With the likelihood of a September rate cut currently at c.80%, a higher-than-expected inflation reading could push back predictions of the first Fed cut.


What about the coming months?

↑ As the dust settles from the recent French elections, the effect of European political uncertainty could weigh on EURUSD.


Calendar

Tuesday 3pm | Fed Chair Powell testifies

Thursday 1.30pm | CPI (Jun)

Friday 1.30pm | PPI (Jun)




Euro

What happened last week?

Yesterday saw a surprise result in the second round of the French elections with the left wing NFP winning more seats than any other party (Macron coming second and the RN alliance winning 143 seats). Outside of France, last week saw core HICP data coming in slightly hotter than expectations (2.9% Vs 2.8%).

 

What to watch for in the short-term?

 The effect of a far-left coalition on European markets is likely to play out over the coming weeks with the NFPs plans to roll back the retirement age and increase the minimum wage, potentially weakening the Euro. 

 

What about the coming months?

 Euro price action in the near term is likely to be predominantly driven by French political developments with a lack of economic data this week. Looking further ahead, the ECB’s interest rate announcement on July 18th could reference the path for European rates over the coming months.




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