Markets will turn their attention to the eurozone this week where the European Central Bank is forecast to hike rates by 75 basis points on Thursday. The central bank has been preparing markets for a larger-sized rate rise and is promoting the message that ‘front-loading’, with larger hikes than usual, should work in favour of bringing down inflation ahead of what is now becoming a faltering global economy.
The euro remains pressured, especially against the US dollar where it has now fallen to 99 cents. However, the pound has been even weaker of late, dropping into the €1.15 handle. The greenback continues to march on in fine form. The next key test for GBPUSD arrives at $1.1409 which is the March 2020 pandemic low. Breaking this level would mark new lows not seen since 1985. Yes, you read that correctly!
Elsewhere, there will be central bank decisions from the Bank of Canada and the Reserve Bank of Australia. In the UK, it’s expected Liz Truss will be announced as the new prime minister. The impact of this outcome on sterling is uncertain at present. Although it may provide some relief to a bruised and battered British pound.
Have a good week.
Written by Viv Savani. 6:43am, September 5th 2022
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