Morning Brief – This week’s only just begun.

Charles Porter
Thu 3 Aug 2023

This week’s only just begun.

Despite summer trading conditions very much taking hold of markets, there has been sufficient data and enough market-sensitive headlines to move some spot FX markets. For example, the data observing the German labour market this week provided sufficient doubt to question some of the Euro’s recent declines and relieve some fears of widespread European economic decline. However, the real action is certainly still in store for later this week. 

We kick off with the Bank of England this afternoon who will release its latest monetary policy decision. Despite 25-basis points remaining the base case and that most visibly priced within markets, there are still visible expectations of a 50-basis point hike within market pricing. Despite the full ‘double hike’ not being reflected within the SONIA curve, pricing as of market open this morning is sufficiently advanced to conclude there should be a shift in GBP spot and shorter dated forward prices whatever the outcome at midday today. If the BoE repeats is bumper June 50-basis point hike, we can expect some GBP strength at least whilst market digest the prose accompanying the decision.

The BoE decision today will not be the last important release for the week or even day. 3pm BST sees ISM services data released which has shown an ability to command the direction of USD trading in recent months. This data will act as a prelude to tomorrow’s USD-sensitive non-farm payroll data which will be observed closely as markets assess the path ahead for the Federal Reserve. The data could help inform whether the stop-start learner driver inspired rate late-cycle hiking programme is all over or another jerk forward is in order. 

Discussion and Analysis by Charles Porter

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