GBP continued its impressive run on Friday with the GBP index claiming a new one-year high. Notably GBPEUR made new 9-month highs.
* Daily move - against G10 rates at 5:00pm, 11.06.23
** Indicative rates - interbank rates at 5:00pm, 11.06.23
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A quiet day today but the week is set to be pretty busy. The highlight from the UK will be tomorrow's job and wage numbers which of course will have an impact on inflation expectations, and thus interest rate expectations – markets continue to price in an additional 1% worth of hikes going into year-end. Whilst the unemployment rate is expected to rise to 4% but wages are expected to rise to 6.1% from 5.8%. April's GDP numbers are out on Wednesday, expected to oscillate into positive territory, 0.2%, from -0.3% on May. Today hawkish BoE Mann is expected to speak, and her comments will likely continue to support GBP.
US inflation numbers are due release on Tuesday with expectations for CPI year-on-year to decline to 4.1% and core CPI YoY expected to decline to 5.2% and then on Wednesday evening we have the Fed interest rate decision. Recent Fed speak has suggested the Bank will skip hiking this month and this has been largely priced in. We wait to see if this is a pause followed by a resumption of hikes in July. Any suggestion that the Fed are done with hikes and we could see USD weakness.
The ECB’s interest rate decision is due on Thursday with expectations of a 0.25% hike. Markets price in one more hike of 0.25% beyond this. May's final inflation numbers, which are expected to remain at 6.1%, are due out on Friday.
GBPEUR continues its impressive run since February with the pair now at new 9-month highs. Interest rate differentials remain a key driver on the pair, with markets seeing 1% worth of hikes this year versus 0.5% worth of hikes this year. UK job numbers are out tomorrow, and could be a headwind for additional gains should the data suggest the job market is slowing down.
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