GB Pound
What happened last week?
↑ Following the dollar selloff and consequent rebound on Tuesday, GBP/USD spent the remainder of last week appreciating.
What to watch for in the short-term?
↓ This week is an important one for UK data with the latest inflation, employment and growth numbers all being released. For the pound, cooling data this week could push markets into favouring two more 2024 cuts from the BoE which would likely be a sterling negative.
What about the coming months?
↓ For cable, the markets recent bearish repricing of US rate cuts could continue to drive GBP/USD higher between now and September’s Fed announcement.
Calendar
Tuesday 7am | Unemployment rate (Jun)
Wednesday 7am | CPI (Jul)
Thursday 7am | GDP (Q2)
US Dollar
What happened last week?
↑ Markets spent much of Tuesday reversing Monday’s historic selloff following weaker jobs data, an unwinding of the carry trade (on the back of a surprise Japanese rate cut) and a sharp decline in global stocks.
What to watch for in the short-term?
↓ While the crash was short, sharp and largely reverted on Tuesday, the underlying dynamics remain – markets believe the Fed has left rates too high for too long and have missed the opportunity for a soft landing. Nevertheless, with rate expectations going from overdramatic to mediating, the base case has shifted to a 50bp cut in September’s meeting.
What about the coming months?
↓ If the markets rate forecasts are correct, 100bp of cuts vs c.55bp just a couple weeks ago should spell dollar depreciation. Conversely, if upcoming data is hotter than expectations, the dollar could make a recovery over the coming weeks.
Calendar
Tuesday 1.30pm | PPI (Jul)
Wednesday 1.30pm | CPI (Jul)
Euro
What happened last week?
↑ For GBP/EUR, last week’s price action was primarily driven by the US and Japanese initiated global volatility.
What to watch for in the short-term?
↑ The single currencies appreciation since the start of August looks like it could continue for the foreseeable as markets cut their forecasts of the BoE / ECB rate spread. In particular if UK inflation continues to cool, EURGBP could retest 0.86 in the near term.
What about the coming months?
↓ With Ukraine recently taking counter offensive measures on Russian soil, any further escalations over the coming months could be a euro negative.
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