Two more years

Recap

Quiet start to the week with very little volatility, but we did see GBP in general continue its retracement higher following last week's BoE meeting that was broadly interpreted less dovish than anticipated. Broader risk appetite in markets also helped GBP gain. The EU Sentix investor confidence came in higher than expected at -18.9 versus an expected fall to -24.5. The EUR finished broadly unchanged.

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Today

Market rates

* Daily move - against G10 rates at 7:30am, 08.08.23

** Indicative rates - interbank rates at 7:30am, 08.08.23

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Data points

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Speeches

• USD – Fed Harker and Barkin

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Our thoughts

Just the final July inflation readings from Germany today, which is expected to fall in line with previous estimates. Currency moves today will largely be dictated by general risk appetite in the markets, and should equities continue to climb then we would expect GBP to follow suit. USD will take cues from speeches by Harker and Barkin today, but any larger moves will be determined by inflation numbers on Thursday.

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Chart of the day

Whilst we may be near the end of the BoE’s interest rate hiking cycle, households that fixed into 2-year mortgages back in 2021 will be in for a reality check when they come to renew their deals. The average 2-year fixed mortgage rate (based on 75% LTV) in July was 6.26%, compared to 1.29% in July 2021. Inflation may be falling to provide some relief in the cost of living, but the extra mortgage costs will likely put households under pressure going into the end of the year, as well as putting pressure on the UK economy.

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Have a great day.