GBP
The pound gained last week, notching back-to-back weekly advances, amid broad-based USD weakness, while also benefitting from favourable tailwinds as equities continued to stage a bear market rally.
Nonetheless, the UK’s economic outlook remains dicey, with consumer sentiment stuck at record lows, and with a further steep rise in energy prices coming in the autumn.
This week, all eyes will be on Thursday’s BoE decision, and whether the MPC decide to raise rates by 50bps for the first time since inception, as the Old Lady’s battle to tame inflation, which is set to peak north of 11% in Q4.
EUR
The common currency also benefitted from the softer dollar last week, with the market able to shrug off the litany of issues facing the eurozone economy, including the growing prospects of Russian gas supplies being cut off this winter.
Despite this, the outlook for the common currency remains rather poor, particularly with the window for ECB tightening slamming rapidly shut, despite last month seeing another new record high inflation print.
Looking ahead, there is relatively little worth noting on this week’s docket, besides the ‘final’ reads on numerous PMI surveys.
USD
As expected, the Fed hiked rates by 75bps last week, however the greenback softened in reaction, as the FOMC ditched forward guidance, and moved into a more data-dependent stance; a move that markets interpreted as dovish, and likely leading to more modest hikes going forward.
This, coupled with a second straight quarterly GDP decline (i.e. a recession) being seen in Q2, saw the dollar soften markedly last week, and took the greenback to a 3-week low against a basket of peers.
This week, Friday brings the main highlight, in the form of the July jobs report; employment has been a bright spot in the economy of late, hence the figures will be closely watched for any further signs of economic momentum waning.
World News
For the first time since the war began, a ship loaded with grain has left the port of Odesa. In July, Russia and Ukraine signed a deal to reopen the Black Sea ports so that grain exports can resume – Which are needed to alleviate the growing global food crisis. The cargo ship which set sail this morning, is expected to be the first of many ships to transport 22 million tons of grain and agricultural goods that have been stuck in ports on the Black Sea because of the war.
Conservative leadership hopeful, Rishi Sunak has promised “radical” change if he succeeds in becoming Prime Minister. The former Chancellor has promised to cut the basic rate of tax by 20% from 20p in the pound to 16p, by the end of the next parliament. This will be funded by additional tax receipts generated by forecast economic growth, whilst Rishi Sunak promised not to increase government debt to cover the cost.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 2nd August | AU | RBA Interest Rate Decision | 1.35% | 1.85% |
| Tuesday 2nd August | US | JOLTS Job Openings | 11.25m | 10.99m |
| Thursday 4th August | UK | BOE Interest Rate Decision | 1.25% | 1.75% |
| Friday 5th August | US | Average Hourly Earnings m/m | 0.30% | 0.30% |
| Friday 5th August | US | Non-Farm Employment Change | 372k | 250k |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7450.24 | 7450.24 |
| DAX | 13484.05 | 13471.2 |
| CAC40 | 6448.5 | 6447.18 |