Weekly Report & World News 12.09.2022

GBP

Despite hitting a 37-year low on Wednesday, sterling managed to end the week in positive territory, benefitting from PM Truss’ plan to freeze energy prices at their current level for up to 2 years, a significant and unfunded fiscal loosening, though one which will also have significant positive implications for the growth and inflation outlooks.

Of course, market news was rightly overshadowed by the sad news of the Queen’s death, and will likely continue to be so this week. The period of national mourning that the UK is now in is unlikely to have major economic impacts, however it has led to the BoE’s scheduled policy announcement being postponed a week until 22nd September.

Nevertheless, this week’s economic docket is still a relatively busy one, including the latest inflation, retail sales, and employment figures; the former is of most importance, particularly with the next BoE decision still a coin-flip between a 50bps or a 75bps move.

EUR

The ECB’s most hawkish decision ever, a 75bps hike, allowed the euro to notch its first positive week in four last week, despite policymakers painting a grim picture of the outlook, forecasting economic stagnation in Q4, as well as above target inflation through to the end of 2024.

Markets also expect another jumbo hike from the ECB next month, though the durability of the EUR’s gains seems somewhat questionable, especially when the degree of economic harm inflicted by energy prices this winter remains largely unknown.

This week, a plethora of ECB speakers are due, along with the final August inflation figures.

USD

The dollar’s recent rally took a ‘pause for breath’ last week, with the buck rolling over against a basket of peers for the first week in four, pulling back a touch from the 2-decade highs set earlier in the week.

Despite this, with global growth continuing to slow, and with another 75bps hike likely coming from the Fed next week, the macroeconomic landscape is still a positive one for the greenback.

Looking ahead, Tuesday’s CPI figure highlights this week’s calendar, with intensifying core inflation pressure likely to overshadow a peak in the headline inflation rate, as lower energy prices are offset by continued tightness in the labour market.

 

World News

With the Queen’s passing last week, King Charles is to lead a procession of royals as the Queen’s coffin is taken to St Giles’ Cathedral in Scotland. Charles, who was proclaimed King following his mother’s passing announced that The Queen’s funeral will take place on a bank holiday Monday 19th September.

US Treasury Secretary Janet Yellen remains hopeful the US economy can avoid a recession but added that the need for The Federal Reserve is to conquer inflation. The Treasury Secretary aligned herself with Federal Reserve Chair Jerome Powell, as the central bank stay fully committed to taming inflation – which is near a 40-year high.

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