Sterling continues its decline yesterday, and coming into the early hours of today’s trade. Risk appetite still remains very low with equities continuing to fall, dragging the pound down with it. GBPUSD is now the lowest since March 2020, and GBPEUR at the lowest since the 1st July. Concerns of higher energy bills and the cost of living crisis is also clearly a concern for markets, and unless we see significant changes in fiscal policy after the new PM takes the helm to support households, markets seem unlikely to support sterling.
August manufacturing PMIs are due this morning.
Higher than expected inflation came in yesterday, with the August reading now at 9.1%. Market bets for a 0.75% rate hike in September increased as a result, and ECB member Holzmann suggested that such a hike could well be discussed in that September meeting. As a result, the strength in the euro resisted the dollar’s wave of dominance for another day, but against the pound, euro sellers are getting the best rates seen in the last two months.
On the agenda today will be August manufacturing PMIs and the unemployment rate.
Bids for the dollar continued yesterday evening and into today, supported by the notion that the Fed will need to hike rates further, as well as getting safe haven support on weakening equities. Fed member Loretta Mester also commented, and supported recent Fed speak that she does not expect the Fed to cut rates in 2023.
Even a miss on the ADP employment print wasn’t sufficient for markets to consider selling the dollar. Manufacturing PMIs from both S&P and ISM are due out this afternoon, with focus on tomorrow’s job data and whether this will support recent Fed speak.
Equals. Morning Report- 1st September 2022
Today’s Interbank Rates at 09:44 am against sterling movement.
GBP>EUR – 1.1553
GBP>USD – 1.1595
EUR>USD – 1.0034
GBP>CAD – 1.5292
GBP>AUD – 1.6974
GBP>SEK – 12.398
GBP>AED – 4.2573
GBP>HKD – 9.1000
GBP>ZAR – 19.896
GBP>CHF – 1.1324
· 15:00 USD ISM Manufacturing PMI(Aug)
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