This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
This week, the calendar has a distinctly British feel as events in the capital have the potential to drive foreign exchange markets. A mixture of both political and macroeconomic factors will play their part in determining whether Sterling can extend its impressive run of form against the US Dollar and recovery against the Euro.
It all begins with the parliamentary vote on the Repeal Bill, which is expected to take place in the early hours of Tuesday morning. The bill is being put forward by the government to revert a significant proportion of EU law currently being observed by the UK into Britain’s own law.
The government hopes that should the bill pass, it will allow for an easier adoption of policies in order to speed up the Brexit negotiating process. On the other hand, should the bill fail to pas in the face of opposition from the Labour Party, amongst others, then it could present the government with a fresh headache in an already testing time.
On Thursday, the Bank of England provides its latest monetary policy update (12pm). Having finally bolstered the committee’s ranks back up to the usual nine members after dropping to seven earlier in 2017, expectations are for only two members to back a rate hike in the face of rising inflation. Ian McCafferty and Michael Saunders are the lone hawks, with both members voting for a rate hike on the past two monetary policy meetings. Yet they are likely to be overruled by the majority of the committee as the Bank’s house view – championed by Governor Mark Carney – that high levels of UK inflation (>2%) are predominantly as a result of weak Sterling.
The UK data barrage begins with all-important Inflation prints (Tuesday; 9:30am). Expectations are for the Bank’s preferred Consumer Price Index (CPI) and Core CPI prints to tick higher in June, with the former approaching 3% (2.8% exp. vs 2.6% previous). This would reflect the BoE’s view that falling Sterling (-2% vs USD; -2.6% vs EUR) is pushing inflation higher. If it comes in further than expected, Carney and co. may be forced to put out a more hawkish statement on Thursday, aiding Sterling.
It then falls upon UK Employment and Wage data (Wednesday; 9:30am) for the last data print before the BoE meeting. While Inflation has been ticking higher, wages have been relatively stagnant despite Unemployment being at a record 42-year low of 4.5%. While wages are expected to tick higher, the pinch on consumers’ pockets is unlikely to be abated and could thwart hawkishness from the BoE.
After the Bank of England, traders’ attention will cross the Atlantic. Ahead of next week’s Federal Reserve FOMC meeting and accompanying press conference, US Inflation (Thursday; 1:30pm) will be closely scrutinised for any indication that the Fed may be forced to abandon plans to hike interest rates in December. While Fed Fund Futures currently show a 28% chance of a December rate hike, this is significantly down from 42% only a month ago. Should Core CPI come in lower as expected,
Also of interest will be the US’s reaction to Hurricane Irma, which has ravaged the state of Florida over the weekend. The clean up will be costly and could hinder the Trump administration’s plans for tax reform and infrastructure spending, which would damage the US dollar.
Having traded a fresh 33-month high last week, the Euro this week will be predominantly subject to external influences, although some macro data releases could give the single currency some direction. This includes German CPI (Wednesday; 7am), Eurozone Employment and Industrial Production (Wednesday; 10am), and Eurozone Wage Growth and Trade Balance (Friday; 10am).
Key data this week (Sign up here to receive our daily live macro-calendar)
—
UK Economic Announcements
09:30 Inflation (CPI, RPI, PPI, House Prices)
Intl Economic Announcements
00:50 PPI, Machinery Orders (JP)
11:00 NFIB Small Business Confidence (US)
15:00 JOLTs Job Openings (US)
—
UK Economic Announcements
09:30 Employment & Earnings
Intl Economic Announcements
03:00 Foreign Direct Investment (CN)
07:00 CPI (DE)
10:00 Employment & Industrial Production (EZ)
10:00 IEA Oil Market Report (US)
13:30 PPI (US)
15:30 EIA Crude Oil inventories (US)
—
UK Economic Announcements
09:30 Retail Sales
12:00 Bank of England Monetary Policy Update
Intl Economic Announcements
03:00 Industrial Production & Retail Sales (CN)
05:30 Industrial Production (JP)
07:45 CPI (FR)
13:30 CPI (US)
UK Economic Announcements
07:00 Wholesale Prices (DE)
10:00 Wage Growth & Trade Balance (EZ)
13:30 Retail Sales & NY Manufacturing Index (US)
14:15 Industrial Production (US)
15:00 Michigan Consumer Sentiment (US)
18:00 Baker Hughes Rig Count (US)
For information on deliverable FX, including how you can save thousands on currency exchange, put in a call to our trading floor on 0203 051 7461. It’s all part of the service!
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
Comments are closed.