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Foreign Exchange Analysis ~ 13 November 2023


GB Pound

Sterling weakened after an outsized fall in house prices.


What to watch for in the short-term?

With the Bank of England now not meeting until a week or so before Christmas, data has the chance to build an interesting case for a weaker pound.


Wage and inflation numbers are due this week and while the Bank has been happy to look through the former, the latter could easily fall below 5% for the first time since January 2022.

Given three members of the MPC voted for a hike in November, their speeches should be monitored. One of those, Catherine Mann, speaks this afternoon.


What about the coming months? The Sunak administration is reshuffling at the moment but political pressure one way or the other on the pound will develop as a result of next week’s Autumn Statement.


Calendar

Friday 07.00 GMT | UK Inflation


US Dollar

What happened last week?

The dollar’s pause continued ahead of key event risk this week.


What to watch for in the short-term?

The decision by Moody’s to downgrade the outlook on US sovereign debt brings the prospective shutdown of the US government this Friday into sharp focus.


Should a funding bill or continuing resolution not be found by the weekend then non-critical US government functions will close, damaging both the US economy and the dollar.


This week also sees inflation and retail sales numbers which may offer another chance for dollar weakness; will retail sales suggest that higher interest rates are capping consumer activity?


Elsewhere, Joe Biden and Xi Xinping meeting in San Francisco midweek at the APEC conference.


What about the coming months? Friday’s news will be able to illuminate whether the next few months are rangebound or the start of a weaker USD.


Calendar

Tuesday 13.30 GMT | US CPI


Euro

What happened last week?

EURUSD was undamaged by central bank comments last week.


What to watch for in the short-term?

We’re not in a position yet to suggest that the EURUSD cross has had all the recovery it’s likely to generate, but the rally already looks very tired.


While ECB rate setters will make speeches that further rate hikes are still possible, markets have started to price in 3 cuts of 0.25% in 2024, undercutting the euro and suggesting that whatever the ECB says, the market is not listening.


What about the coming months? The chances of a Eurozone growth issue are increasing with weakness expected in both output and sentiment data to come.


Calendar

Tuesday 10:00 GMT | Eurozone GDP




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