Sterling has been influenced by broader risk appetite this year

GBP

The pound enjoyed a mixed week, losing ground against the euro but gaining as the US dollar finally saw some weakness on Friday.

Sterling pushed lower earlier in the week following Liz Truss’s appointment as the new Prime Minister and the early week’s decline saw Sterling hit a 37-year low trading as low as 1.14 against the dollar. The rally enjoyed by Sterling on Friday was not across the board against other major currencies, indicating the rally was motivated by dollar weakness and not optimism over Sterling. The appointment of PM Truss saw a mix of emotions from markets with the British pound feeling the effects. Initial doubts around the appointment stemmed from the idea that the new PM might move against the Bank of England as she had previously voiced strong thoughts regarding the bank’s mandate. Instead the new PM announced a number of measures to help consumers with unprecedented energy prices and cost of living increases.

GBP has been influenced by broader risk appetite this year. The August interest rates hike came with a poor set of economic forecasts which have only been compounded by the European Central Bank’s rates hike decision this week and the prospect of another Federal Reserve’s rates hike remaining in play. The outlook for Sterling doesn’t inspire confidence at present with consensus for lower prices and potentially parity to the US dollar still in play.

The UK economy grew by 0.2% in July, a smaller increase than expected, according to figures from the Office for National Statistics. Still, it is a return to growth after the economy shrank by 0.6% in June. Looking at the broader picture, GDP was flat in the three months to July compared with the previous three months. Services grew by 0.4% in July 2022, after a fall of 0.5% in June 2022, and was the main driver in the rise in GDP. Information and communication grew by 1.5% and was the largest contributor to the services growth in July. The ONS said people may have cut back on electricity use following the surge in prices this year.

Key announcements

06:00 – USD – Goods Trade Balance (Jul)

06:00 – USD – Gross Domestic Product (MoM)(Jul)

06:00 – USD – Index of Services (3M/3M)(Jul)

06:00 – USD – Industrial Production (MoM)(Jul)

06:00 – USD – Industrial Production (YoY)(Jul)

06:00 – USD – Manufacturing Production (MoM)(Jul)

06:00 – USD – Manufacturing Production (YoY)(Jul)

06:00 – USD – Total Trade Balance (Jul)

06:00 – USD – Trade Balance; non-EU (Jul)

06:00 – USD – Machine Tool Orders (YoY)(Aug)