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Audere Research

Foreign Exchange Analysis ~ 30 August 2023


GB Pound

What happened last week?

Hawkish comments by the BOE’s Ben Broadbent sent GBP higher as the week came to a close.


What to watch for in the short-term?

Are we in a position to make too many judgements on the UK economy at the moment? I would say not. And the movement of the pound in the short term is likely to be almost exclusively up to the movements of the currencies that it faces.


In dollar terms, we have already seen a slight slowing of the enthusiasm for the greenback but this week’s payrolls report could be confirmatory in either direction. Similarly, the euro has inflation figures to contend with this week and bulls are looking for European stickiness to bolster the single currency.


The pound in turn, could become unstuck, unloved by the limelight.


What about the coming months? We have another data cycle to contend with before the next Bank of England meeting in a little over three weeks’ time, and it makes sense that the Bank of England will push for further rate hikes.


Calendar

Friday 09.30 BST | UK PMIs


US Dollar

What happened last week? Dollar sat quietly and a little nervously ahead of Jerome Powell’s speech at Jackson Hole. What to watch for in the short-term? The ongoing lesson from Jackson Hole for the USD remains that data is the best predictor of rate movements in the future. Payrolls this week is obviously the marquee event but weakness seen in yesterday’s JOLTS numbers suggested that the US economy’s ability to create jobs is slowing a little. Pro-cyclical currencies did really well against the USD on that basis and will look to continue such a run should Non-Farms disappoint. What about the coming months? Wobbles in consumer confidence are not enough to call the end of the services rally in the States yet but does give us cause for concern heading into Q4. Calendar Friday 13.30 | US Jobs Report


Euro

What happened last week? The euro was held up by Christine Lagarde’s comments in the US urging a focus on data. What to watch for in the short-term? The European question is only one that can and will be answered by Thursday’s inflation numbers. While we think that a rate hike in September will come through pretty much regardless of the number, the strength of the European HICP number will allow the euro to either confirm that decision this week or when the ECB sits down on the 14th of this month. In the case of EURUSD, even if the inflation number is strong a decent jobs number from the States could be enough to bash the pair back towards the 1.08s. What about the coming months? Germany’s updated fiscal plans are unlikely to offer much support for the single currency unless a cap on energy prices for German industry comes to pass. Calendar

Thursday 10.00 BST | European Inflation



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