Following an unusually quiet week, the resumption of a busy schedule was expected to bring high volatility to the markets. With the British Pound gaining momentum and the US economy appearing weaker than it has in some time, this week presented a good opportunity for the Pound to reach fresh monthly highs. A significant amount of key US data also provided valuable insights into how the US economy is holding up after an extended period of high interest rates.
The first key data point of the week came from the UK, with employment figures showing that the country’s unemployment rate had declined much faster than anticipated. Forecasts had predicted a figure of 4.4%, but the actual rate came in at 4.2%. This, coupled with strong wage data, indicates that the UK employment market is once again gaining momentum. Later that day, the US released its latest PPI figures, with expectations set at 0.2% for both Core PPI and PPI. However, both metrics were underwhelmed, with Core PPI remaining flat and PPI coming in at 0.1%. This data continued to support the narrative of a slowing US economy.
On Wednesday, both the UK and the US released CPI data. The UK’s CPI was first, with forecasts predicting a rebound to 2.3% following the previous drop to 2.0%. Although the final figure came in slightly below expectations at 2.2%, the uptick from the prior reading was enough to renew market confidence in Sterling. Later, the US CPI was released, with forecasts expecting it to remain unchanged at 3.0%. However, the final figure came in at 2.9%. Although this was only a slight change, the fact that it fell into the 2% range heightened expectations of a rate cut at the next meeting, which in turn strengthened the Pound against the USD.
Thursday continued the busy schedule, with the UK GDP figures released first. As expected, there was no growth m/m, with the results showing a 0.0% change. Preliminary GDP q/q also met expectations, coming in at 0.6%. Later that day, the US released its retail sales and unemployment claims figures. In contrast to other recent releases, retail sales exceeded forecasts, reaching 1.0%, significantly higher than the expected 0.4%. Core retail sales also outperformed, registering 0.4% compared to the forecasted 0.1%. Unemployment claims came in strong for the US as well. These positive releases briefly strengthened the USD, but this was short-lived. By Friday morning, the Pound had reached new highs against the USD following the release of UK retail sales data, which saw an increase from -0.9% to 0.5%.
Next week is expected to be considerably quieter. The key focus is on Thursday, when the UK, Eurozone, and US will release their latest PMI results. Aside from that, the week is relatively quiet, with the annual Jackson Hole Symposium being a notable event. Bank of England Governor Andrew Bailey is scheduled to speak late Friday night at the Symposium.
