Sterling rides wave of risk sentiment ahead of GDP report – Forex News Preview



In the United Kingdom, preliminary GDP growth data for the second quarter will hit the markets at 06:00 GMT Friday. The British pound has suffered heavy damage this year, falling behind even the war-ravaged euro despite a series of rate increases from the Bank of England. This dataset is unlikely to change this dynamic. Instead, the pound is at the mercy of global risk sentiment, which seems unstable. 

Metamorphosis

It has been a tough year for sterling. While the spotlight has been on the euro getting smoked by the energy crisis, the pound has performed just as badly, even though the Bank of England has raised interest rates at every single meeting since late last year. 

This softness seems to boil down to two elements. First, the UK is not immune to the global energy shock. It might not import most of its energy from Russia directly, but it is still a net importer and since energy markets are so interconnected, it ends up paying higher prices regardless. As such, the trade deficit has blown up this year. 

Currencies don’t like trade deficits. It means a nation imports more than it exports, which over time tends to devalue a currency. The one thing that’s even worse is having a huge government deficit at the same time. This is the famous ‘twin deficit’ problem. When an economy like the UK runs twin deficits for a long time, it essentially depends on foreigners to fund those deficits, making it sensitive to any shifts in the global mood. 

Which brings us to the second obstacle for the pound - its sensitivity to global risk appetite. Cable has become very vulnerable to any swings in stock markets, having a stunningly strong correlation with Wall Street this year, which in turn has gone downhill. Amplifying this effect has been the US dollar’s transformation into a safe-haven asset. 

GDP report

Turning to the upcoming growth data, the British economy is forecast to have contracted by some 0.2% in the second quarter as the cost of living crisis took its toll. Of course, this won’t be a shock for the Bank of England, which already penciled in a negative print in its forecasts. 

In fact, the BoE went a few steps further. It projected five quarters of economic contraction starting in the final quarter of this year, implicitly predicting a year-long recession. But it still raised interest rates by a half percentage point, arguing that inflation is simply far too high. 

In case the GDP print manages to overcome forecasts, Cable could edge higher, with the first major barrier to the upside being the 1.2290 zone. 

On the flipside, if the numbers are even worse than expected, the pair could instead inch lower for another test of the 1.2000 region. 

Big picture

Admittedly, this dataset won’t change much. Market participants already have a good idea of what the BoE will do over the next few months - raise rates in a slow, methodical manner. What is less certain is how risk appetite will evolve. 

In this sense, the risks seem tilted to the downside for Cable. Stock markets have recovered substantially over the past seven weeks, but for dubious reasons. First and foremost, the bond market started to panic about a recession, which in turn dragged yields down and eased the pressure on equity valuations. 

The earnings season hasn’t been great either. Adjusted for inflation, real earnings growth for the S&P 500 has turned negative for the year. Even corporate profits can’t keep up with inflation.

And with stock markets rallying while yields drop, financial conditions have loosened again, putting more pressure on the Fed to roll out another shock-and-awe rate increase. Meanwhile, most forward-looking indicators suggest that avoiding a recession would be a miracle. 

It’s difficult to be optimistic about a sustained recovery in Cable in this unstable regime. 

최신 뉴스

RBNZ to stick to its guns, eyes on guidance – Forex News Preview


Week Ahead – RBA and RBNZ to weigh 50-bps hikes but NFP report to set the mood


Can the RBA bring the aussie back to life? – Forex News Preview



Eurozone inflation set to hit a new record high as euro keeps tumbling – Forex News Preview

면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.

온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.

이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.

우리는 웹사이트에서 최고의 경험을 전해드리기 위해 쿠키를 사용하고 있습니다. 자세히 읽거나 쿠키 설정을 변경하세요.

리스크 경고: 고객님의 자본이 위험에 노출 될 수 있습니다. 레버리지 상품은 모든 분들에게 적합하지 않을수 있습니다. 당사의 리스크 공시를 참고하시기 바랍니다.