Macro Commentary

UK data this week showed the jobs market remains resilient, with average earnings up to 3.6%, its fastest rate of growth for 11 years.

Unemployment remains at its lowest levels since the mid-1970s.

Inflation meanwhile, held steady at 2%, whilst retail sales were much stronger than expected.

We will have a new prime minister next week, and he will begin the unenviable task of trying to renegotiate the Brexit agreement.

In the US, the market is looking for an interest rate cut at the end of the month due to the uncertain inflationary outlook, with 0.25% priced in, though 0.5% remains a possibility.

Globally, slowing growth, trade frictions and increased geopolitical tensions are all weighing on sentiment.

On the exchanges, sterling remains under pressure on the economic weakness and increased risks of a no-deal Brexit.

GBP/USD dropped to 1.2400 this week, its lowest level since April 2017, before finding a short-term base. We would need a break above 1.2750 to alleviate the short-term negative sentiment.

GBP/EUR remains near its year-to-date lows, and needs a closing break above 1.1300 to gain some upside momentum. Strong buying interest remains ahead of last year’s low of 1.1000.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
25/7/19 ECB Deposit Facility Rate -0.40% -0.40%

*Bloomberg survey

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7493 +12.01%
S&P 2995 +19.48%
EUROSTOXX 3482 +16.94%

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1260 AUD/USD 0.7065
GBP/USD 1.2530 USD/AED 3.6730
GBP/EUR 1.1125 GBP/AED 4.6020
USD/CHF 0.9835 EUR/AED 4.1355
USD/JPY 107.65 XAU/USD 1438

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.76600% 2 year 0.74%
6 month 0.80200% 3 year 0.75%
12 month 0.86313% 5 year 0.81%


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