Key Points
- Despite positive data GBP continues to struggle.
- A quiet week expected for EU on data front.
- Stronger Core PCE figures helped boost USD.
Market Update
GBP
Sterling struggled last week, notching a fourth weekly decline in five, despite significantly better than expected UK data, with the latest PMIs showing the services sector expanding at its fastest pace in 8 months, as well as a significant improvement in conditions in the manufacturing industry.
However this, and the subsequent hawkish repricing of BoE policy expectations, was not enough to prevent cable from slipping beneath the 1.20 handle, as well as beneath the 200-day moving average, as the dollar gained ground across the board.
This week, the UK calendar is rather quiet, with no top-tier releases due, leaving markets to feed off just the ‘final’ reads on the aforementioned PMI figures, in addition to a handful of BoE speakers, including Governor Bailey on Wednesday.
EUR
The common currency also struggled last week, slipping towards the 1.05 mark, as the rally seen around the turn of the year continues to fizzle out, seeing the EUR notch its worst weekly performance since last September, despite core CPI rising to a new record high, emboldening the ECB’s hawks a little.
Put simply, the EUR appears to have run out of bullish catalysts, with the ECB outlook now well-priced, and economic data no longer surprising consistently to the upside, giving traders little reason to enter fresh longs.
Looking ahead, another relatively quiet calendar awaits this week, with ‘final’ PMI figures also in focus here, in addition to the ‘flash’ read on February CPI due on Thursday.
USD
The greenback was again ‘pick of the bunch’ in G10 FX last week, notching a 4th weekly advance against a basket of peers – the best run for the dollar index since last May – while also rising north of the psychologically important 105 figure, as the market continued its hawkish repricing of the Fed outlook.
Hotter than expected core PCE figures, the Fed’s preferred inflation gauge, on Friday were the cause of this repricing, with a 25bps hike now seen in March, May, and June; though continued shakiness in the equity market, with both the S&P and Nasdaq having their worst weeks since last December, also helped to fuel healthy haven demand for the buck.
In the week ahead, the latest ISM PMI figures will be the market’s primary focus, particularly the services gauge, where a blowout print at the start of the month kickstarted the ‘no landing’ narrative upon which the market continues to trade.
World News
The UK household energy price cap is expected to fall, despite bills still on course to rise. The CAP will fall by £999 to £3280, but due to a fall in government support bill will rise for many. Jeremy Hunt, who is expected to present his budget on the15th March, faces demands to halt the planned cut in support, which will see to some bills rising as much as 40% on 2022’s prices. Energy prices have fallen in recent months, however these prices have yet to be passed onto consumers.
Last week president Putin gave a live speech from Moscow on the Ukraine war, one year on from the Russian invasion. He addressed the nation, where he blamed the West for starting the war and he was suspending the country’s participation in a nuclear treaty with the US, which caps the number of strategic nuclear weapons that the US and Russia can deploy.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 28th February | CA | GDP m/m | 8.40% | 8.10% |
| Tuesday 28th February | US | CB Consumer Confidence | 107.1 | 108.5 |
| Wednesday 1st March | UK | BOE Gov Bailey Speaks | ||
| Wednesday 1st March | US | ISM Manufacturing PMI | 47.4 | 47.9 |
| Friday 3rd March | US | ISM Services PMI | 55.2 | 54.4 |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7878.66 | 7878.66 |
| DAX | 15209.74 | 15351.63 |
| CAC40 | 7187.27 | 7243.03 |