Home Daily Commentaries Markets digest last week’s key data

Markets digest last week’s key data

Daily Currency Update

The Euro is holding lower ground following the downbeat German industrial figures. Industrial Production in Germany fell more than expected in June, the official data showed on Monday, suggesting that the manufacturing sector activity is deteriorating. While the Euro appears challenged, by the expectations that the European Central Bank will halt its streak of nine consecutive interest rate hikes in September amid signs that the underlying inflation in the Euro Zone has peaked. Underlying inflation in the region likely peaked during the first half of 2023. This is seen as another factor that contributes to the offered tone surrounding the Euro.

Key Movers

The UK central bank, after raising its key interest rate by 25 bps to a 15-year peak level of 5.25% last Thursday, stated that the current monetary policy stance is "restrictive". This further contributes to a mildly offered tone surrounding GBP. The Bank of England, however, pushed back against market expectations for interest rate cuts in 2024 and warned that rates would stay higher for longer to bring inflation down to target. To sum up, the fears of the UK’s economic slowdown and labour market crunch weigh on Sterling ahead of the top-tier data and events.

As investors look past Friday's mixed US monthly employment details, the prospects for further policy tightening by the Federal Reserve assist the US Dollar to attract some buying. It is worth recalling that the headline US Non-Farm Payrolls missed estimates and showed that the economy added 187K jobs in July. Adding to this, the readings for May and June were revised lower, suggesting that demand for workers was slowing. That said, solid wage growth and a downtick in the unemployment rate pointed to continued tightness in the labour market. This keeps the door for one more 25 bps rate hike by the Federal Reserve in September or November wide open and lends some support to the USD.

Expected Ranges

  • GBP/USD: 1.27130 - 1.27611 ▼
  • GBP/EUR: 1.15389 - 1.15933 ▼
  • GBP/AUD: 1.93318 - 1.94073 ▲
  • EUR/USD: 1.09707 - 1.10148 ▲