Currency Note

Consumer confidence steadies sterling

By Alex Bennett August 25th, 2023

Sterling’s interesting week reaches the last day having lost 1% since Wednesday morning against the euro and closer to 2% against the US dollar since Tuesday.

The reason for sterling’s fall has been poor economic data this week that suggest the Bank of England will need to moderate interest rate rises. The data showed below-expectation readings for, in date order, CBI Industrial Trends Orders, UK manufacturing and services industries as measured by PMI, and CBI Distributive Trends. The only positive was better public finances announced on Tuesday.

Overnight, however, GfK Consumer Confidence was marginally improved at -25, suggesting that UK consumers feel that the cost of living crisis is easing. This appears to have steadied sterling.

The big event today is the meeting of central bankers in Jackson Hole, in Wyoming’s Rocky Mountains, where US Federal Reserve chair Jerome Powell may give hints that US interest rate rises are coming to an end, or he may not, and later today we will hear from European Central Bank (ECB) president Christine Lagarde.

In business news, the Guardian reported that the British government is to delay post-Brexit checks on incoming food and fresh produce from the EU, to avoid the risk that they could raise food price inflation even more. This will be the fifth delay.

Nike has decide that it will after all sell replica shirts of English football goalkeeper Mary Earps, winner of the ‘Golden Glove’ award for best goalie at the tournament, after a backlash from consumers.

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GBP: Pound licking its wounds at end of difficult week

Sterling’s losses from Wednesday continued yesterday and the pound hits Friday around 0.25% down against the euro, 1.1% down on the US dollar and somewhere between those against other major currencies.

That appears to have steadied with today’s consumer confidence readings, however.

Next week starts with a bank holiday, but there is in fact almost no data being released on the economic calendars. That doesn’t mean no market movement however, and the fall out from the central bankers’ shindig at Jackson Hole could stretch into next week.

There will also be quiet a lot of data from the euro side of the fence.

GBP/USD past year

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EUR: Slow week could liven up with Lagarde speech

The single currency has gained in a fairly minor way on the pound, Norwegian krone and Swiss franc this week, but more generally it’s been a week of losses.

Germany’s Ifo Business Climate data has just come in below expectations at 85.7.

Later today ECB president Christine Lagarde will be talking at Jackson Hole in a speech entitled: “Structural Shifts in the Global Economy”.

The big event of next week will be GfK Consumer Confidence for Germany on Tuesday, then some inflation data midweek, including Spain’s which was 2.3% last month, and Germany where it was 6.2%.

USD: Markets await Jackson Hole comments

The dollar’s positive week and month continued yesterday, with 0.30% to 1.30% rises against the next few most-traded currencies in the past week.

The biggest rise was against the pound, and the greenback is now 2.5% stronger than at the end of July.

That could all change this afternoon, with the highly influential Fed Chair speech at the Jackson Hole Symposium.

Next week we’ll hear the first of the two main gauges of the US labour market, JOLTS job openings on Tuesday.

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