Thursday and Friday's risk aversion in the FX markets was reversed yesterday as diplomatic initiatives to temper tensions in the Middle East caused traditional safe havens such as JPY, CHF and USD to weaken. GBP gained as a byproduct of the better risk appetite.
* Daily move - against G10 rates at 7:30am, 17.10.23
** Indicative rates - interbank rates at 7:30am, 17.10.23
This morning's job report disappointed with wages increasing less than expected as well as the number of employees on payroll shrinking unexpectedly by 11,000. GBP has weakened as a result as this eases the potential for another rate hike by the Bank of England in November. A lower inflation reading tomorrow from the UK and money markets may well rule out any chance of a hike by the Bank – ultimately negative for GBP. For the rest of the day, we have the latest ZEW survey from Europe as well as retail sales numbers from the US. Joe Biden will visit Israel tomorrow in an effort to prevent the conflict in the Middle East from escalating. Risk appetite in markets will continue to be the main driver for FX moves.
Today saw the first tranche of data from the UK with job numbers indicating that the BoE will not need to hike interest rates further. Inflation numbers are due tomorrow and expected to show an easing of price pressures which will all but rule out the chance of any additional rate hikes by the BoE. Now that growth is the main focus, Friday's retail sales will be important to gauge the extent of consumer spending. A miss here and further weakness on GBP can't be ruled out.
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