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Audere Research

Foreign Exchange Analysis ~ 15 July 2024


GB Pound

What happened last week?

 The pound had a strong week last week touching 1.299 against the dollar (a level not seen since July 2023). Cable traded higher on the back of US data supporting forecasts of a September rate cut and conversely hawkish comments from BoE members.

 

What to watch for in the short-term?

With Wednesdays headline CPI data forecasted to come around 1.9-2% we expect the implied likelihood of an August rate cut to increase if services inflation shows material cooling.

 

What about the coming months? With the election firmly behind the UK, the implementation of Labour’s growth focussed manifesto over the coming months should in theory benefit UK companies and the pound. Nevertheless, GBPUSD is still likely to trade as a function of interest rate changes in H2.

 

Calendar

Wednesday 7am | CPI (Jun)

Thursday 7am | Unemployment Rate (May)

Friday 7am | Retail Sales (Jun)


US Dollar

What happened last week?

 Last week was an eventful week for the US and the dollar. From Jerome Powell’s somewhat dovish testimony in congress to cooler than expected headline and core inflation data, the greenback spent the majority of the week gaining against the single currency.

What to watch for in the short-term?

 The response from the market was somewhat muted following the assassination attempt on former president Donald Trump on market open this morning. Demand for the dollar has been positively correlated with a Trump election win so the dollar should see some support this week as the market digests the events of Saturday.

What about the coming months?

 While the aforementioned political risk is a dollar positive, the larger (dollar negative) dynamic is the interest rate outlook for the US with the likelihood of a September cut now fully priced in by markets.

Calendar

Monday 5.30pm | Fed Chair Powell speech

Tuesday 12.30pm | Retail Sales (Jun)




Euro

What happened last week?

Last week’s hawkish repricing of the UK interest rate outlook combined with the political risk in France benefitted sterling.

 

What to watch for in the short-term?

 While markets have priced in c.35bp of rate cuts this year in Europe, Thursdays interest rate announcement is unlikely to contain anything particularly shocking to markets.

 

What about the coming months? Despite GBPEUR already touching multi-year highs, the pair could track higher if the interest rate differential widens in the second half of the year.

 

Calendar

Wednesday 10am | HICP (Jun)

Thursday 1.15pm | Interest rate announcement




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