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Audere Research

Foreign Exchange Analysis ~ 23 July 2024


GB Pound

What happened last week?

 Last week saw further strength from sterling on the back of continued sticky inflation combined with soft data posted on the other side of the Atlantic.

 

What to watch for in the short-term?

With a lack data this week markets are gearing up for the BoE’s interest rate announcement on August 1st. Money markets predict less than 25% chance of a rate cut.

 

What about the coming months?

 Sterling’s strength may be tested if UK inflation cools and the BoE proceeds with the anticipated rate cuts. The BoE’s August meeting will be a critical event, potentially setting the tone for the remainder of the year.



US Dollar

What happened last week?

 Last week, President Joe Biden's decision to withdraw from the US presidential race and endorse Vice President Kamala Harris as his successor caused minimal market reaction. The DXY dollar index opened slightly lower but quickly rebounded. Investors appeared to have anticipated the announcement.


What to watch for in the short-term?

 Investors are focusing on how Kamala Harris performs against Donald Trump in the polls leading up to the Democratic National Convention in August. GDP and core PCE inflation data could cause some dollar volatility toward the end of this week.


What about the coming months?

 The US fiscal situation, with $183 billion in Treasury notes being auctioned, is a significant concern for investors with any signs of a fiscal crisis impacting the dollar.


Calendar

Thursday 1.30pm | GDP (Q2)

Friday 1.30pm | PCE (Q2)



Euro

What happened last week?

The European Central Bank (ECB) meeting highlighted downside risks to economic growth, causing a subdued market response. Despite this, the euro traded within a narrow range.

 

What to watch for in the short-term?

 With a light economic agenda which includes eurozone business sentiment readings and a speech from the ECB president this week, we are unlikely to see much Euro volatility in the short-term.

 

What about the coming months?

 The ECB’s policies and economic data will continue to drive the euro's performance. Any further signs of economic slowdown in the eurozone could lead to more dovish policies and potential euro weakness.

 

Calendar

Thursday 4pm | ECB President Lagarde speech



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