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Accendo’s Foreign Exchange Forecasts, Monday 14 August

Macro observations

Last week saw geopolitical tensions between the US and North Korea reach fever pitch as the leaders of both sides stepped up the war of words. However, after a weekend in which both the tweet-happy Trump and unpredictable Kim avoided further warmongering, FX traders have returned to relative calm.

As a result, eyes are likely to move away for the Korean peninsula, at least for the time being, as key elements of the UK’s Brexit negotiating strategy are set to be released. The publishing of the position papers coincides with PM Theresa May’s return to the political arena after her Summer holiday, while manoeuvring within her cabinet looks to have results in a victory for the ‘hard’ Brexit camp. Subsequently, Sterling continues to trade close to its 10-month lows of last week and may rely on drivers this week from outside of the political sphere.

The UK headlines macroeconomic proceedings this week, with key readings likely to heavily influence sentiment at the Bank of England. Despite being one of the most rollercoaster weeks in global politics since Donald Trump’s election in November, Sterling only moved by a single cent against the US dollar, its tightest weekly trading range in three years.

Starting on Tuesday, Consumer Price Inflation (9:30am) will be closely scrutinised by policymakers at Threadneedle Street. Having unexpectedly fallen in June to 2.6% from May’s 4-year high of 2.9%, markets are expecting a slight uptick in July.

Any reading above 3% would likely create significant discussion surrounding a rate hike in the not-too-distant future, especially if Wednesday’s Unemployment & Earnings figures (both 9:30am) show that the labour market is continuing to tighten yet wages remain stagnant, creating a pinch on consumers’ pockets.

Rounding off the data barrage is July’s Retail Sales figure (Thursday; 9:30am), expected to retreat from June’s 2.9% although remaining above May’s equal 2017 low reading of 0.9%

Finally, after a relatively quiet week last week for the Euro, flash German and final Eurozone GDP readings (7am Tuesday and 10am Wednesday, respectively) and the final reading of Eurozone Inflation (Thursday; 10am) provide the European Central Bank with three key data releases to consider.

The two former measures provide backward-looking insight into the effectiveness of current monetary policy, while the latter will highlight the hurdles that still need to be overcome. Strong GDP figures from the Eurozone (seen confirmed at its highest since Q1 2011) and its engine room (expected at its highest since Q1 2016) could see the Euro return to its to its two and a half year highs against the US dollar, however soft inflation data could quash the hawkish turn at the ECB.

Elsewhere, other notable macroeconomic releases this week include US Retail Sales (Tuesday; 1:30pm) NAHB Housing Index & Business Inventories (Tuesday; 3pm), US Housing Starts (Wednesday, 1:30pm), the Philadelphia Fed Index (Thursday; 1:30pm) German Producer Price Inflation (Friday; 7am) and University of Michigan Consumer Confidence (Friday; 3pm).

 


Key data this week (Sign up here to receive our daily live macro-calendar)

Tuesday 15 August

UK Economic Announcements
09:30      Inflation, House Prices

Intl Economic Announcements
07:00    GDP (DE)

13:30     Import/Export Inflation, Empire Manuf, Retail Sales (US)
15:00       NAHB Housing Index, Business Inventories (US)

Wednesday 16 August

UK Economic Announcements
09:30     Unemployment, Earnings

Intl Economic Announcements
10:00     GDP (EZ)

13:30       Housing Starts/Permits (US)
15:30       Oil Inventories (US)

Thursday 17 August

UK Economic Announcements
09:30     Retail Sales

Intl Economic Announcements
10:00      Inflation (EZ)

13:30        Jobless Claims, Philly Fed (US)
14:15         Industrial Production (US)

Friday 18 August

Intl Economic Announcements
07:00       Producer Price Inflation (DE)
10:00       Construction Output (DE)
15:00       Uni of Michigan Consumer Confidence (US)
18:00       Baker Hughes Oil Rig Count (US)


GBP/USD (‘Cable’)

Technicals

  • Cable remained within a $0.01 range last week. Will it break higher or lower this week?
  • Stochastics turned oversold
  • Momentum at lowest level since mid-June
  • Directional indicators diverging bearishly

GBP/EUR


Technicals

  • Remains close to last week’s fresh 2017 lows of €1.097
  • Stochastics remain oversold while RSI turns oversold
  • Momentum remains negative
  • Directional indicators diverging bearishly

EUR/USD

Technicals

  • The Euro has faltered after reaching a 2-year high of $1.191 a fortnight ago
  • Stochastics have bounced after last week falling to lowest level since June
  • Momentum turned negative for first time in a month 
  • Directional indicators converging bearishly

For information on deliverable FX, including how you can save thousands on currency exchange, put in a call to our trading floor on 0203 051 7461. It’s all part of the service!

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

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