ACM Update 08-08-22

Written by: Liam Alexander
Date posted: 08-08-22

The outlook for the British weather remains sunny. The outlook for Sterling not so much. Dovish commentary from the Bank of England around recession fears in Q4 ’22 and a continued contraction in 2023 mean risks remain to the downside for Sterling.

Last week

- The Bank of England raised rates 50bps to 1.75%.

- Sterling/Euro battled to regain 1.20 the figure trading a high of 1.1988.

- CPI (Consumer Price Index) hit 9.4% (highest level since 1982). Do we top out at 13-15% as some are suggesting or are we at peak inflation already? Are we tightening too much after the worst of inflation and should inflation dissipate early next year will there be a reversal in rates? Or are we now on a trajectory of higher interest rates for the next 24 months? We will see how the Bank of England manage the situation although the jury is out on their guidance at present.

- NFP (Non-Farm Payrolls) printed +528K against an estimate of +250K. Cable (Sterling/Dollar) fell on the back of the release.

You can view the recent movements in GBP/EUR in the graph below


You can view the recent movements in GBP/USD in the graph below


This week

Risks remain to the downside for Sterling. Any positive USD news is going to weigh on GBP heavily and we could be trading under 1.20 this week. If you have a Dollar exposure, please reach out to me or one of the Aston team and we will be happy to discuss your specific requirements in detail.

Data releases

  • German Harmonized Index of Consumer Prices (YoY Jul) expected print of 8.5%
  • UK GDP (YoY Q2) expected print of 2.8%

Have a fantastic week.