Weekly Round-Up & The Week Ahead

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

GBP

A busy week for UK based data saw the pound remain volatile last week, with traders searching for clues on the Bank of England’s next moves. UK CPI came in as expected, holding at the 2% target year on year, with Core CPI stagnant at 3.5%. The cost of services seem to be the main concern, and markets adjusted predictions for an August cut accordingly. Labour data was mixed and Retail Sales was disappointing, dragging sterling down from the highs seen earlier in the week, although it remains elevated against both the dollar and the euro.

The only major data point for the pound this week will be S&P Global PMI’s on Wednesday. Worth noting that recent large intra-day swings are likely to remain as we build towards central bank meetings in the UK and US next week.

EUR

The ECB acted as anticipated last week, keeping key rates unchanged while offering little guidance on future reductions. President Lagarde reiterated the council’s data dependant approach, expressing that economic risks are tilted to the downside. The market currently sees at least two further cuts from the ECB this year, possibly seeing all G3 central banks cutting in September. The euro may continue to feel the pressure, should the path of ECB interest rate cuts accelerate beyond that of the Fed and BoE.

A quiet week for euro-based data sees HCOB PMI’s as the focus on Wednesday.

USD

The market has not been short of dollar news recently and the last 7 days highlighted the varying themes that can have an effect on the worlds most traded currency. The assignation attempt on Donald Trump kept political news in the headlines, and this week has begun with the announcement that Joe Biden will step down from the presidential race. Data wise, US Retail Sales excluding Auto’s impressed but dovish remarks from Fed Chair Jay Powell restricted the dollar, with GBP/USD breaching 1.30 following UK inflation figures. Analysts now see a closer alignment of the Fed and BoE rate paths, with a growing possibility that both begin loosening monetary policy in September.

US data will be the focus this week with S&P Global PMI’s on Wednesday, GDP on Thursday and Core PCE on Friday. Traders will also have their eye on next week’s Fed meeting.

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