Key Points
Data this week focuses on EU and US interest rate changes
Both Central Banks are expecting to raise rates by 25bps
GBP/USD drops off from the 15-month highs experienced last week.
FX Report
GBP
Sterling faced headwinds last week, losing around 1.8% against the dollar in what proved to be the pound’s worst week since March, with the decline coming largely as a result of cooler-than-expected inflation figures, which sparked a dovish repricing of BoE expectations, with markets now pricing a peak rate below 6%
The pound’s struggles also came as the dollar broadly strengthened, while sterling was unable to significantly benefit from another positive week for global equities, despite its status as a high-beta currency, likely posing further concern for GBP bears
This week’s economic calendar is relatively light as, besides Monday’s flash PMI figures, attention is set to largely focus away from the UK’s shores
EUR
The common currency also slipped last week at the hands of a significantly stronger USD, losing ground for the first week in 4, retreating from the new cycle highs set north of the $1.12 handle a week prior
The USD’s mild resurgence was not the only factor at play, however, with dovish comments from ECB Governing Council member Klaas Knot, often one of the most hawkish policymakers, casting doubt on the chances of further tightening after the summer break, thus sparking a modest dovish repricing across E/Z fixed income
Speaking of the ECB, Thursday’s decision from the central bank will be this week’s calendar highlight, with a further 25bps hike all-but-guaranteed, and a tightening bias likely to be maintained, though any certainty around the aforementioned potential September rate hike is likely to be absent
USD
After being beaten up a week prior on cooler than expected inflation figures, the greenback roared back last week, gaining over 1% against a basket of peers, taking the Dollar Index (DXY) back above both the psychologically important 100 handle, and the prior YTD low at 100.85, a break of which had been the catalyst for said sharp declines
Nevertheless, last week did have a ‘calm before the storm’ vibe to it, with volumes a little on the light side, as traders sat on their hands ahead of a monster week of event risk this week, including not only the policy decisions detailed here, but also 50% of the S&P 500 by market cap reporting earnings
This week, the primary driver of the USD will be the FOMC’s policy announcement on Wednesday; with a 25bps hike all-but-certain, attention will focus primarily on the guidance that the Committee provide in terms of future moves, in particular whether a second 25bps hike, as signalled in the recent dot plot, remains likely before the year is out
World News
Elon Musk has revealed he is rebranding twitter to ‘X’, as he aims for twitter to become “the everything app”. Musk has previously compared his idea with China’s Wechat which combines several features into one. The announcement come after Meta’s Threads was launched earlier this month, gaining 100 million users in 5 days, which posts a huge threat to twitter.
Ocado shares have surged 8% today, following the news it has secured £200m in its patent battle against a Norwegian firm following a 3 year review. Autostore would pay the sum to settle all outstanding patent litigation claims launched by Ocado in order to defend their intellectual property.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Monday 24th July | US | Services and Manufacturing PMIs | ||
| Tuesday 25th July | US | CB Consumer Confidence | 109.7 | 112.1 |
| Wednesday 26th July | US | Interest Rate Decision | 5.25% | 5.50% |
| Thursday 27th July | EU | Interest Rate Decision | 4.00% | 4.25% |
| Thursday 27th July | US | Advance GDP q/q | 2.00% | 1.70% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7,663.73 | 7,663.73 |
| DAX | 16,177.22 | 16,126.71 |
| CAC40 | 7,432.77 | 7,405.66 |