Market focus this week has been very much on yesterday’s Bank of England meeting, with the vote for no change in policy coming in at 7-2. The committee reiterated the market is underpricing future interest rate rises, and indicated that a rate increase may be needed in the coming months. The market is pricing in a 50% probability of a November hike, and has fully priced in a 25bps increase.
The UK economy remains mixed, with inflation coming in above consensus at 2.9%, a 5 year high, whilst wage increases remain disappointing at 2.1%, despite employment remaining strong.
In the US, dollar sentiment remains weak as the inflationary outlook continues to soften, with the market no longer expecting another rate increase this year.
On the exchanges, GBP/USD is trading at a new yearly high, above 1.3400, following the BoE meeting yesterday. We have not closed above 1.3500 since Brexit and this will obviously be a key resistance.
Positive sterling momentum has pushed GBP/EUR above 1.1250. We expect 1.1400 to be a significant topside barrier, whilst 1.1000 should now be solid support.
GBP/USD – 1-year chart
Week ahead
| Date | Release | Last | Expected* |
| 18/9/17 | EU CPI YoY | 1.3% | 1.5% |
| 20/9/17 | UK Retail Sales YoY | 1.3% | 1.2% |
| 20/9/17 | US FOMC Fed Funds | 1.25% | 1.25% |
*Bloomberg survey
Equity Indices
| Indices | Previous Close | YTD % Change |
| FTSE 100 | 7295 | +1.80% |
| S&P | 2495 | +11.47% |
| EUROSTOXX | 3526 | +7.10% |
| DFM GENERAL INDEX | 3657 | +3.56% |
Foreign Exchange
| Currency | Last | Currency | Last |
| EUR/USD | 1.1915 | AUD/USD | 0.7995 |
| GBP/USD | 1.3430 | USD/AED | 3.6730 |
| GBP/EUR | 1.1270 | GBP/AED | 4.9330 |
| USD/CHF | 0.9625 | EUR/AED | 4.3760 |
| USD/JPY | 110.70 | XAU/USD | 1327 |
UK Benchmark Rates
| Libor | Swap Mid | ||
| 3 month | 0.30150% | 2 year | 0.72% |
| 6 month | 0.43143% | 3 year | 0.83% |
| 12 month | 0.63869% | 5 year | 0.99% |
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