Growth story under the spotlight

Market reports
Thanim Islam
  • BoE elects to hold rates
  • PMIs to gauge economic activity


The BoE elected to hold interest rates at 5.25% in yesterday's widely anticipated Bank of England meeting. The Bank caveated the decision with comments stating that “Policy must be restrictive enough for `sufficiently long'”, and that “Further tightening is required if inflation persists”. Governor Bailey also stated that the job is not done yet, given the recent rise in oil prices, and that the talk of rate cuts is premature.

How did GBP react? Initially we saw GBP drop on the decision, but the weakness was not sustained, and we saw the currency claw back some of its losses later in the afternoon as participants who were short GBP took profits on the recent weakness on the currency.

Trading on USD pairs was interesting as well. Initially USD gained across the board, with the index hitting 6-month highs, but these gains were not sustained and by the close of European trading, the currency had fully reversed any gains, suggesting markets see these levels as an appropriate level to sell the currency.


Market rates

* Daily move - against G10 rates at 7:30am, 23.09.23

** Indicative rates - interbank rates at 7:30am, 23.09.23

Data points


  • None today.

Our thoughts

Rates were yesterday's story, and today we focus on growth prospects for the EU, UK, and US with the release of PMI activity in September. This will also give a good idea of what GDP is likely to be in each economy in the third quarter. Ultimately the currency that will benefit will be the one whose activity levels come in better than expected, and higher that its peers. UK retail sales released this morning indicated a minor recovery is underway when compared the previous set of figures, but still the numbers came in lower than expected.

Chart of the day

As the FX space switches from interest rate differentials to growth differentials, today’s PMI numbers will be a key factor to determine currency flows. The US is currently leading the charge in activity compared to the UK and EU, and should this continue then this will support the soft landing narrative in the US.

Source: Bloomberg Finance L.P.

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