Key Points
GBP/USD moves to a 15-month high.
US dollar weakness across the majority of it’s peers
Investors expecting a change in the Federal Reserve’s policy.
Market Update
GBP
Sterling again traded well last week, taking full advantage of the broad-based USD weakness sweeping the G10 FX market, breaking north of the 1.30 handle, to touch its firmest levels since April 2022
While a large degree of the move was the softer buck after cooler than expected CPI data, the pound continues to attract demand in its own right, with many market participants still favouring the GBP – the best performing G10 currency YTD – as a yield/carry play, with money markets continuing to price Bank Rate moving north of 6% next year, in addition to both short- and long-end gilts yielding close to their highest in 15 years
However, a pivotal week awaits for the pound, with the latest inflation data due on Wednesday, where a cooler than expected print could see a dovish revision to market pricing, and mark a turning point in the GBP’s fortunes; the latest retail sales figures, due Friday, will also be keenly watched
EUR
The EUR also benefitted from the broadly weaker USD last week, notching a gain of almost 2.5%, to record its best week since last November, breaking above the $1.12 handle in the process
Once more, as has been the theme with the common currency of late, there were few EUR-specific catalysts behind the move, though ECB speakers continue to maintain a hawkish tone, increasingly touting the possibility of a September rate hike
Looking ahead, that lack of eurozone catalysts is likely to persist into this week, with the economic calendar devoid of any impactful releases, given the typical lack of interest that markets pay to either the final CPI figures or the preliminary release of consumer confidence
USD
The greenback, as noted, suffered at the hands of the bears last week, losing over 2% against a basket of peers, after cooler than expected CPI and Core CPI figures (3.0% & 4.8% respectively) sparked a dovish repricing of longer-run bets on Fed policy
Furthermore, the continued strong performance of global equities, with most benchmarks adding around 3% last week, and renewed demand for longer-duration Treasuries both also contributed to the softening in the dollar, all of which took the DXY below the psychologically important 100 handle for the first time in over a year
This week, Tuesday’s retail sales data will likely prove the highlight, though a range of second-tier releases, including the latest industrial production and housing figures, will be in focus, though the path of least resistance for the USD appears to point lower for now, at least until the next FOMC decision on 26 July
World News
Supermarkets and other fuel retailers have been given until august to voluntarily share live prices in a government scheme proposed to prevent overcharging, following the report that found drivers paid an extra 6p per litre of fuel last year due to a lack of competition. The scheme will enable drivers to compare prices online to find cheaper fuel.
The US Competition watchdog had launched an investigation into the founder of artificial intelligence software ChatGPT, in order to find out what the company’s data privacy rules are and what it as in place to prevent its technology from giving false information or breaching any data rules.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 18th July | AU | Monetary Policy Meeting Minutes | ||
| Tuesday 18th July | CA | CPI m/m | 0.40% | 0.30% |
| Tuesday 18th July | US | Retail Sales m/m | 0.30% | 0.50% |
| Wednesday 19th July | UK | CPI y/y | 8.70% | 8.20% |
| Thursday 20th July | AU | Unemployment Rate | 3.60% | 3.60% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7,434.57 | 7,434.57 |
| DAX | 16,105.07 | 16,013.52 |
| CAC40 | 7,374.54 | 7,314.17 |