GBP
Sterling had something of a quiet week last week, with cable pausing for breath after four straight weekly gains amid a quiet economic calendar, seeing the pair struggle to break convincingly above the 1.23 handle.
Nevertheless, near-term momentum remains in the bulls’ favour, with the quid continuing to trade above its 200-day moving average, and any weakness being rapidly bought into.
Looking ahead, this week looks like the final ‘proper’ week of the trading year, being highlighted by the BoE’s latest policy decision, with markets expecting the MPC to be bitterly divided once more, while ultimately plumping for a 50bps hike, while also pushing back further on the market’s pricing for the future rate path.
EUR
The common currency also had a relatively quiet week last week, with market participants largely twiddling their thumbs and sitting on the side-lines ahead of a bumper week of event risk this week.
Consequently, the EUR spent much of the week a handful of pips either side of the 1.05 handle, with trade incredibly indecisive and rather uninspiring in nature.
This week, Thursday’s ECB decision highlights the calendar, with markets expecting a 50bps hike, along with additional colour on the timing and composition of plans to reduce the size of the balance sheet.
USD
Fitting with the broad theme of G10 FX last week, the greenback also had a quiet spell, though did find some notable demand on Friday after a hotter than expected PPI figure dented hopes that inflation would fade rapidly.
Speaking of inflation, Tuesday’s CPI release is this week’s marquee event, with risks tilted to the upside after the factory gate inflation beat, likely raising expectations of a more hawkish FOMC on Wednesday.
Said FOMC decision will be this week’s other key highlight, with Chair Powell set to announce a downshift to a 50bps hike, while also reiterating that the battle against inflation is far from being won, with further hikes, albeit at a slower pace, likely in Q1 23.
World News
The UK economy returned to growth in October, the economy expanded by 0.5% following September’s contractions of 0.6%, beating economists forecasts. The ONS reported the main cause of growth came from the wholesale and retail sector, which were both affected by closures during the mourning period of the late queen. Whilst economic growth is positive, the Bank of England still believe that the UK is in a recession, and this will follow through into 2023 but will remain shallow.
Metro Bank has been fined £10 million for breaching rules by providing investors with incorrect information. The FCA states that the bank knew what they were publishing was wrong and have consequently raised the fine to £10 million. Metro share prices have suffered as a result, losing hundreds on million in share value and overall fell by 39%.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tues 13th December | US | CPI y/y | 7.70% | 7.30% |
| Weds 14th December | US | Interest Rate Decision | 4.00% | 4.50% |
| Thurs 15th December | UK | Interest Rate Decision | 3.00% | 3.50% |
| Thurs 15th December | EU | Interest Rate Decision | 2.00% | 2.50% |
| Fri 16th December | UK, US & EU | Services and Manufacturing PMIs | ||
| Share Index | Prev. Close | Open |
| FTSE100 | 7476.63 | 7476.63 |
| DAX | 14370.72 | 14300.43 |
| CAC40 | 6677.64 | 6647.9 |