GBP
Sterling slipped for a third straight week last week, with cable breaking below the 1.15 marker for the first time since March 2020, as the USD continued to gain ground, and sentiment towards the UK economy’s toxic combination of high inflation, and slow economic growth, continued to worsen.
The pound’s near-term fortunes continue to look rather bleak, especially with the BoE remaining behind the global curve on interest rate hikes, and with the steep rise in energy prices yet to be fully passed on to consumers.
Looking ahead, the announcement of the new Prime Minister, likely to be Liz Truss, highlights this week’s calendar, though Truss’ expected policies of unfunded tax cuts and significant additional spending are unlikely to be looked upon favourably by markets.
EUR
The common currency also closed in the red for the third week running, weighed down by news that the Nord Stream gas pipeline would not reopen as scheduled, fuelling further fears about the dismal energy situation facing the continent this winter.
Now that the parity barrier has decisively given way, and the prior lows around 0.9950 have been taken out, the pair looks to have room for significant further declines, if the bears manage to properly wrangle control.
This week, Thursday’s ECB decisions highlights the calendar, with a 75bps rate hike expected; however, with growth projections likely to be dismal, and the window for rate hikes rapidly closing, it’s tough to see a hawkish ECB as a bullish catalyst for the EUR.
USD
The dollar rose to new 20-year highs against a basket of peers last week, as the market continued to hawkishly reprice the US monetary policy outlook, anticipating a third straight 75bps rate hike this month.
In the prevailing macro environment of rapidly rising US rates, and sharply slowing global economic growth, it remains near-impossible to bet against the greenback.
Looking ahead, after solid jobs data on Friday, this week’s US calendar is a little quieter, with only the latest services PMI survey of note.
World News
European ministers are set to meet to discuss measures to deal with the soaring price of energy. The bloc race to deal with the crisis which is deepening. The EU presidency currently resides with the Czech Republic who is expecting to propose a price cap and additional tools to give members emergency intervention tools. Further pressure is on the Euro after Russia cut off key gas supplies, which signals a difficult winter ahead.
The UK is set to announce Boris Johnson’s successor as Prime Minister, as Liz Truss and Rishi Sunak fought a bitter leadership contest. Rishi Sunak remains odds-on favourite to become the Conservative leader, as the new Prime Minister faces a daunting winter with energy prices soaring, inflation seemingly out of control and a dismal economic outlook. The result is set to be announced at 12:30pm UK time today.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Monday 5th September | UK | Conservative Leadership Contest Result | ||
| Tuesday 6th September | AU | RBA Interest Rate Decision | 1.85% | 2.35% |
| Wednesday 7th September | UK | Monetary Policy Report Hearings | ||
| Thursday 8th September | EU | ECB Interest Rate Decision | 0.50% | 1.25% |
| Friday 9th September | EU | EU Economic Summit | ||
| Share Index | Prev. Close | Open |
| FTSE100 | 7281.19 | 7281.19 |
| DAX | 13050.27 | 12827.58 |
| CAC40 | 6167.51 | 6048.22 |