Another day, another strong dollar
Dollar maintains its ascent against the pound, growing concerns around inflation, and Reserve Bank of Australia rate release.
Sterling bulls may have felt optimistic yesterday morning, as the avoidance of a US government shut down and stronger than expected PMI data from China hinted at an upbeat session.
Alas, not the case, the dollar maintained its July ascent against the pound and a basket of currencies. The ISM Manufacturing data was always going to be heavily scrutinised as investors look for confirmation that the US economy remains robust despite the high interest rate environment.
A stronger than expected figure, nearing growth territory in the sector allowed the dollar to appreciate against the pound. The trend was then compounded as Federal Reserve Governor
Michelle Bowman, stated “I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way”.
In order to buck that trend, a positive UK Services print on Wednesday, and a softer than expected US labour data, JOLTS (Job Openings and Labour Turnover) today and particularly the Non-Farm Payroll number on Friday may be crucial in allowing GBPUSD to close the week above $1.2000.
Inflation concerns continue to grow
Helen Dickson, the British Retail Consortium Chief Executive mentioned that whilst the YoY shop price inflation fell overnight to 6.2%, while the UK observed the first monthly drop in food prices for two years. There are risks to the falling inflation trend; climbing oil prices, sugar shortages and continued supply chain disruption due to the war in Ukraine.
Echoing inflation concerns was the ECB’s Phillip Lane, mentioning that food price increases are still a substantial issue and services inflation remains sticky. Reducing inflation to the 2% target will not be achieved in the same timeframe as the move to 4%, particularly as he expects gas prices to rise moving into the winter months.
At this point little more needs to be said about the prospect of sticky inflation and longer periods of high interest rates.
Elsewhere
The Reserve Bank of Australia maintained interest rates at current levels, with little change observed to the currency.
Download
article
If you would like a PDF of this commentary, please contact us and we'll be in touch.
Contact usRelated
Commentary
Find out how we have helped our clients meet their hedging requirements.
UK House Prices, Bank of Canada, Eurozone Retail Sales, and Today’s Events
UK average property prices fell in November, expectations met by the Bank of Canada, lower than expected Eurozone retail sales, and what's happening today.
UK PMI Data, Food Price Inflation and Oil Prices
PMI's higher-than-expected, UK has highest food price inflation in G7, and oil prices dip to lowest level in last 5 months.
US Aid to Ukraine, Google’s AI, Nuclear Energy Topic of COP28, and UK Property Market
Military aid to Ukraine from the US could run dry by the end of December, step forward for 'Deep Mind', Google's AI specialist, aims to increase nuclear power usage by over 20 countries, and forecasts for UK house prices to fall.
Monday Morning Update
Gold market reacts to Fed comments, easing of Swiss inflation, EU uncertainty in supplying aid package to Ukraine, and what's happening today.
WTFX: Issue 7
We discuss the conflicts of interest that have come out of COP28, namely why a petrostate is hosting the climate change event. Other global conflicts are also covered in this months issue, with Djibouti at the pinch point of one of the world's busiest shipping routes.
French Inflation Eases as Output Contracts
Easing of French inflation, first day of. the OPEC+ meeting, China increase involvement in Israel-Palestine conflict, and what is happening today.
Dovish Signals from Fed Policy Makers
A focus on Fed's next interest rate decision, the words most 'powerful' passport, recession for Sweden, and food price accusations from the CMA.
Morning Update
In a win for the UK space industry, the CAA looks set to approve Britain’s first vertical spaceport in the Shetlands according to The Telegraph
English 
Italian 
Spanish