A very quiet Friday with the only thing to note being the lower retail sales from Canada. Overall though, GBP had its worst week since February following the lower than expected inflation numbers and the markets scaling back peak interest rate expectations. Demand for USD picked up throughout the week as there are suggestions that the Bank of Japan may not take action on monetary policy this week.
* Daily move - against G10 rates at 7:30am, 24.07.23
** Indicative rates - interbank rates at 7:30am, 24.07.23
The big events for this week will be the interest rate decision and monetary policy meetings from the Fed, European Central Bank and the Bank of Japan. Both the Fed and ECB are widely expected to hike by 0.25% but the focus will be signals on any further hikes as well as looking for comments on when interest rate cuts could come into play. The BoJ are widely expected to take no action.
Inflation numbers are due out from Australia, France and Germany and there will be a focus on earnings from the likes of Microsoft, Google and Meta which will give us a barometer for risk appetite in the markets. A drop in risk appetite tends to favour USD.
For today, we get a gauge of how the UK, EU and US are faring in Q3 with the release of PMI numbers. For GBP, this is the only major data point with the services number the big focus. After a poor week for GBP, these figures will need to be stronger to give the currency some support and to offset concerns about the UK’s macro outlook.
Today will provide us with a taste of how the economy has started to perform in this quarter. Growth in the services sector has been slowing since its recent high in April and there have been continued concerns over how the economy is set to perform for the rest of the year given stubborn inflation. A further slowdown in activity will likely lead to weakness for GBP.
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