12th September - Weekly FX Update

Our deepest condolences are with the Royal Family at this time after learning Thursday of last week that Her Majesty had passed. Top Currency Pairs Monday 12th September 04:00 UTC GBP/USD: 1.16118 (Last Week: 1.14750) EUR/USD: 1.00824 (Last Week: 0.99140) GBP/EUR: 1.15170 (Last Week: 1.15744)

Market News

Pound Sterling Queen Elizabeth II, after reigning for 70 years, passed away last Thursday aged 96. She died peacefully at her Scottish estate in Balmoral, and her son, King Charles III said the death of his beloved mother would be "deeply felt" around the world. It is important to note from a currency perspective, that there are a few changes to the UK economic calendar. Firstly, Monday 19th September will be a bank holiday for the state funeral, and secondly the highly anticipated Bank of England (BoE) interest rate decision has been pushed back to Thursday 22nd September. The BoE is currently expected to proceed with either a 50 bps or 75 bps hike, and anything in the meantime that will firm up the latter will benefit the Pound. Wednesday is important as we will see UK inflation figures released, which is currently being exacerbated by the weakness of the Pound, leaving the UK currency very volatile.

Euro The European Central Bank announced the largest interest rate rise in its history last week with a 75 bps move, while sending a clear message it will continue to do so as inflation remains far too high. This helped the Euro recover above parity against the Dollar, while holding extremely strong levels against the Pound. The ECB rate hike was applied to all three basic interest rates, meaning the Deposit Rate now sits at 0.75% and the era of negative or flat rates is in the past. The Euro should prove supportive moving forward due to the ECB's clarity, which is in stark contrast to the vague communication from the Bank of England.

U.S. Dollar The Dollar was sold widely against all major currencies, with the GBP/USD in particular rallying from lows of near 1.14 to 1.169 this morning. EUR/USD is also trading back above parity. The next FOMC meeting will be September 20th-21st, and a 75 bps move is fully priced in with Federal Reserve rhetoric remaining hawkish on their commitment to bring inflation down. Tuesday will see U.S. inflation figures released, and market response could be instrumental in changing the policy stance of the Fed next week. However, despite inflation rates moderating in recent months, the figures released tomorrow are not expected to be anywhere near enough to recede the Fed's aggressiveness.

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