Macro Commentary

The US central bank cut rates by 0.25% this week as widely expected, on weaker global growth and the muted inflationary outlook. Chairman Powell described the cut as a ‘mid-cycle adjustment’, and not the beginning of a long series of cuts.

The market however, does expect a further cut later this year.

Overnight, Trump announced further tariffs on China in a further escalation of the ongoing trade dispute.

In the UK, the Bank of England kept interest rates on hold yesterday, although the committee did cut its growth forecasts for this year and next.

The government meanwhile ramped up its no-deal planning, allocating an additional £2.1bn of funding.

On the exchanges, the dollar strengthened as Powell said the US economic outlook remains favorable.

Sterling meanwhile, remains under pressure on the increased risk of a no-deal Brexit.

GBP/USD dipped below 1.2100 this week, its lowest level since early 2017. We expect strong buying interest ahead of 1.2000, but sentiment remains extremely weak.

GBP/EUR has broken below 1.1000, to almost a 2-year low. There is buying interest building at 1.0800, whilst 1.1200 is the key topside level to watch.

GBP/EUR – 1-year chart

Week ahead

Date Release Last Expected*
5/8/19 UK Markit/CIPS Services PMI 50.2  50.5
7/8/19 UK Halifax House Prices 3Mths/Year 5.7%  4.4%
9/8/19 UK GDP YoY 1.8%  1.4%
9/8/19 UK Manufacturing Prod. YoY 0.0%  -1.1%
9/8/19 UK Construction Output YoY 1.7%  0.6%

*Bloomberg survey

Foreign Exchange

Currency Last Currency Last
EUR/USD 1.1095 AUD/USD 0.6800
GBP/USD 1.2115 USD/AED 3.6730
GBP/EUR 1.0925 GBP/AED 4.4500
USD/CHF 0.9870 EUR/AED 4.0750
USD/JPY 106.90 XAU/USD 1439

Equity Indices

Indices Previous Close YTD % Change
FTSE 100 7584 +10.81%
S&P 2953 +17.82%
EUROSTOXX 3490 +13.69%
DFM GENERAL INDEX 2900 +14.62%

UK Benchmark Rates

Libor   Swap Mid  
3 month 0.77000% 2 year 0.65%
6 month 0.81175% 3 year 0.62%
12 month 0.84700% 5 year 0.64%


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