Marketwatch EU & UK

Daily Insights
September 20, 2023

The pound took a further tumble this morning after data was released showing UK inflation fell unexpectedly despite a surge in fuel prices. The Consumer Price Index rose 6.7% from a year ago in August, less than the 6.8% gain the previous month and an improvement on the predicted increase of 6.9%. In further good news, core inflation, which strips out food and fuel, fell to 6.2% from 6.9%. Sticky UK inflation has led the Bank of England to tighten rates significantly and today’s print comes just a day before the MPC policy meeting which now becomes a real conundrum for rate setters. Ahead of this morning’s print markets were pricing in a 0.25% rate hike tomorrow, but the odds of a pause have significantly increased, driven by lower gilt yields at the open. Markets priced a 90% chance of a rate hike yesterday – at the time of writing, those odds were scaled back to 70%, with traders focusing on the particularly subdued core inflation number this morning.

The pound dropped to its lowest level since May with GBPUSD falling to 1.2334 before recovering a touch, showing that traders were not positioned for the surprisingly soft data. 1.2315 remains considerable support in cable, with a breach of this level opening up a potential move to 1.22. To prevent a move to the downside, the pound needs to find fresh buying intertest to push cable to test the 1.2410 resistance level.

The FOMC conclude their two-day policy with a pause in interest rate already telegraphed to the market. A recent slow down in inflation suggests a pause for the second time this year, with markets currently pricing in a potentially final hike at the November meeting. Investors will pay close attention to the Fed’s updated forecasts and ‘dot-plot’ as the central bank gets close to ending their rate hiking cycle.

Economic Calendar

AUD - MI Leading Index m/m
CNY - 1-y Loan Prime Rate
CNY - 5-y Loan Prime Rate
EUR - German PPI m/m
GBP - CPI y/y
GBP - Core CPI y/y
GBP - PPI Input m/m
GBP - PPI Output m/m
GBP - RPI y/y
CHF - SECO Economic Forecasts
GBP - HPI y/y
AUD - CB Leading Index m/m
USD - Crude Oil Inventories
CAD - BOC Summary of Deliberations
USD - Federal Funds Rate
USD - FOMC Economic Projections
USD - FOMC Statement
USD - FOMC Press Conference
NZD - GDP q/q

Market Indicators

Currency Pairs
Pair High Low
eur/gbp 0.86589 0.86174
gbp/usd 1.23954 1.23328
gbp/aud 1.92127 1.91076
gbp/nzd 2.0874 2.07717
usd/jpy 148.001 147.706
eur/usd 1.0693 1.06726
gbp/jpy 183.299 182.425
eur/cnh 7.8167 7.7941
usd/cnh 7.31503 7.29425
Equities and Commodities
Nasdaq 100 15199.8
DOW 34533.6
S&P 500 4448.56
WTI 89.76
GOLD 1928.63

This document is for information purposes only and does not constitute any recommendation or solicitation to any person to enter into any transaction or adopt any trading strategy, nor does it constitute any prediction of likely future movements in exchange rates or prices or any representation that any such future movements will not exceed those shown on any illustration. All exchange rates and figures appearing are for illustrative purposes only. You are advised to make your own independent judgment with respect to any matter contained herein.

About Simon Walker


Simon Walker is head of the GPS Capital Markets trade desk in our London office where he is responsible for covering market risk in European hours. He has over 25 years’ experience in foreign exchange, working in both sales and trading.