UK reaches double-digit inflation

GBP

UK reaches double-digit inflation

Last week, Sterling slumped against the Euro and the US Dollar despite rising expectations for the Bank of England's next interest rate announcement and some positive UK economic data. However, the week also saw the UK hit double-digit inflationary readings for the first time in 40 years, as the country's latest overall inflation figure extended its highs to an increase of 10.1% from last July. The rise was mainly due to climbing food prices. With UK earnings having to stretch further yet again and the Bank of England's predicted recession slog expected to continue through 2024, the UK's economic outlook is getting ever-darker. Understandably, British households are disheartened, with some of the latest Consumer Confidence readings reflecting lows not seen since the 2008 Financial Crisis. Tomorrow's early figures for services and manufacturing activity in August will be the headline release in the week ahead, shedding some light on the latest business conditions in the UK.

EUR

One-month lows for GBP/EUR

Sterling tumbled against the Euro late last week to one-month lows, while the common currency took a dive against the US Dollar on account of central bank optimism across the pond. In the Eurozone, the shared currency temporarily benefitted from the European Central Bank implying that a second 0.5% interest rate hike was still on the table for September. However, this was short-lived, and the Euro entered this week dangerously close to the parity milestone with the US Dollar. If it follows last week’s trend, the Euro to US Dollar exchange rate has the potential to slip to ten-year lows this week. On the US side, key events to watch out for in upcoming sessions will include the flash Services and Manufacturing figures and estimated US Gross Domestic Product growth data. Meanwhile, the EU will be posting its own services and manufacturing data alongside Consumer Confidence and the ECB's latest Meeting Accounts. Any hints about the future of monetary policy from the latter could trigger movement for the common currency.

USD

US Dollar rally ahead?

Last week, the Greenback benefitted from Federal Reserve officials hinting at a third 0.75% increase in US interest rates for the central bank's meeting next month. The Pound to US Dollar exchange rate fell below 1.18 on Friday last week and remained steady over the weekend. However, with UK economic figures going overlooked and multiple US economic data releases on the horizon, some analysts warn that Cable could fall as far as 1.15 in the coming months. This week could see the Pound fall even further against the Buck as commentary from the Federal Reserve, and a busy US economic calendar has the potential to rally the US Dollar. Releases will include Home Sales figures, unemployment numbers, Personal Consumption Expenditures, and GDP data. The highly-anticipated Jackson Hole Symposium, where a range of key players in financial markets will meet, will be held in Wyoming towards the end of the week. With a range of countries set to be represented, markets will be watching closely for any remarks from officials that could spell volatility.

AUD and NZD

RBNZ's seventh cash rate hike

Over the past week, the Pound to Australian Dollar exchange rate softened slightly, despite a strong start for the pair, with the Pound weakening on Wednesday following higher-than-expected UK inflation figures. Meanwhile, the Sterling to New Zealand Dollar currency pair gained some ground on the week—while the Reserve Bank of New Zealand announced its seventh consecutive interest rate hike, inflation continued to climb. This time, the central bank increased rates by 0.50%, bringing the country's Official Cash Rate to 3.00%. Currently, it's projected that next year will see the overall rate reach 4.00-4.25%; the RBNZ expects 'things to become evenly balanced from there'. In the week ahead, Australia will see initial Manufacturing and Services figures for August print, and both Australia and New Zealand will print their latest Retail Sales readings.

CAD

Canadian Inflation slows

Last week, the Pound to Canadian Dollar exchange rate stumbled lower. Meanwhile, Canada welcomed weaker-than-expected readings across some key inflation indicators; however, although a slowdown in price pressures is a welcome reprieve in a global cost-of-living crisis, commentators have noted that behind the steadying headline figures, there are still signs that prices could continue to grow in the months ahead. This has raised some expectations for a 0.75% interest rate hike in the Bank of Canada's next monetary policy meeting. It's looking like a quiet week ahead for the Canadian economic calendar, leaving the Loonie vulnerable to any volatility created by the eagerly awaited Jackson Hole Economic Symposium.

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