GBP
Sterling lost ground once more last week, having failed twice to break above the $1.15 mark, as concerns about the UK’s unsustainable borrowing path continue to exert significant downward pressure on the GBP, despite the Government’s U-turn on the abolishment of the additional income tax rate.
With this significant fiscal loosening in mind, it’s no surprise that the market continues to price an aggressive response from the BoE, with expectations lofty for a 100bps hike from the ‘Old Lady’ next month.
This week, a couple of notable economic releases – the latest labour market, and monthly GDP figures – highlight the economic calendar, with the jobs market set to remain tight, as growth continues to slow.
EUR
The common currency traded in a similar way to the pound last week, failing to break above parity, which allowed the bears to wrestle back control, and resulted in the EUR losing ground for the third week in four.
Markets continue to look rather dimly on the eurozone’s economic prospects this winter, particularly with the size and scope of the energy shock facing the continent remaining unknown.
Looking ahead, this week’s docket is relatively light, leaving the common currency to be driven largely by external developments.
USD
Friday’s solid labour market report, coupled with a further sharp rise in Treasury yields, allowed dollar bulls to remain in control of G10 FX last week, despite some jitters earlier in the week.
It remains tough to bet against the dollar right now, with the Fed set for another aggressive hike next month, underlying inflationary pressures remaining intense, and global growth slowing dramatically as winter looms.
In the week ahead, Wednesday’s FOMC minutes, along with Thursday’s CPI report are both likely to embolden market hawks expecting a fourth straight 75bps FOMC hike in November.
World News
Strict control measures are set to be placed in China, in a move to control the Covid-19 virus in China. People in China have been very supportive of mass testing, city lockdowns and strict hotel quarantine, however there are signs that patience is starting to wear thin. Easing controls carries big risks for President Xi, at a time when the Communist Party leadership faces criticism over a slowing economy and aggressive approach towards Taiwan
Germany’s foreign minister has called for action against those responsible for the violent outbreaks in Iran. Annalena Baerbock said Germany will ensure the European Union froze Iranian assets and impose entry bans. foreign ministers are expected to decide on sanctions on the 17th October. The proposed sanctions come after the death of Mahsa Amini sparked outrage across the country, as the 22-year-old died in custody after being detained by police.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Wednesday 12th October | UK | GDP m/m | 0.20% | 0% |
| Wednesday 12th October | US | FOMC Meeting Minutes | ||
| Thursday 13th October | US | CPI y/y | 8.30% | 8.10% |
| Friday 14th October | US | Retail Sales m/m | 0.30% | 0.20% |
| Friday 14th October | US | Prelim UoM Consumer Sentiment | 59.1 | 58.6 |
| Share Index | Prev. Close | Open |
| FTSE100 | 6991.09 | 6991.09 |
| DAX | 12273 | 12175.52 |
| CAC40 | 5866.94 | 5806.57 |