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4 Global Market Updates- 17 August, 2022

In this article, we have covered the highlights of global market news about the EUR/GBP, Eurozone, EUR/CHF, EUR/SEK, and EUR/NOK.
EUR/GBP falls below 0.8400, a nearly two-week low, due to higher-than-expected UK CPI.

On Wednesday, the EUR/GBP cross extends its substantial decline from around the 0.8500 level and is losing ground for the fourth straight day. Following the publication of higher-than-anticipated UK consumer inflation numbers, the cross continues down and is presently trading just below the 0.8400 level, or a nearly two-week low.

After the UK Office for National Statistics revealed that the headline CPI surged to the highest level since 1982 and reached 10.1% YoY in July, the British pound marginally increased. The number was much higher than the 9.4% recorded in June and the projected 9.8%, raising hopes for another rate increase by the Bank of England. This is a crucial element pushing the EUR/GBP cross lower.

The UK central bank may raise interest rates gradually due to worries about an economic slowdown. It is essential to remember that the BoE had earlier this month issued a warning that a protracted recession would begin in the fourth quarter. As a result, traders were discouraged from making substantial bullish wagers on sterling, limiting losses for the EUR/GBP cross.

On the other hand, the common currency is still weak amid growing energy supply worries that might push the Eurozone’s economy into a more profound and quicker recession. This, in turn, benefits bearish traders and strengthens the likelihood that the EUR/GBP cross will continue to appreciate shortly. Traders anticipate publishing the flash (second estimate) Eurozone GDP report to gain new momentum.

According to Scotiabank, the EUR/CHF is expected to fall to 0.96 in the fourth quarter.

According to analysts at Scotiabank analysts, the Swiss franc (CHF) is predicted to remain reasonably robust because the Swiss National Bank (SNB) may accept a firmer currency rate to battle persistent internal inflation.

The Swiss National Bank’s decision to increase interest rates and let the CHF appreciate in June “reflects the central bank’s worry that inflationary pressures, albeit mild by worldwide standards, are proving tougher than anticipated to contain,” according to the SNB.

The SNB may now support the CHF if it weakens too much and limits strength thanks to an “active” approach to CHF management.

“The SNB policy rate is expected to increase further in the next weeks, and we expect the CHF to improve versus the EUR to 0.96 into Q4 moderately.”

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EUR/SEK is unlikely to drop below 10.30 this year, according to Commerzbank consistently

Commerzbank economists think that the Swedish krona’s upward potential has been reached. The EUR/SEK pair is thus expected to remain above the 10.30 level.

“The Riksbank continues to be more aggressive in the battle against inflation than the ECB, which should, in theory, offer the SEK a competitive edge against the euro. However, the SEK is always susceptible to pressure during increased market turbulence.

“I do not anticipate EUR/SEK going below 10.30 consistently this year” “Since little additional monetary tightening is expected to be factored in for this year, the SEK’s upward potential is spent.”

EUR/NOK: Krone will rise if Norges Bank sounds restrictive – Commerzbank

On Wednesday, Norges Bank is expected to increase the policy rate by 50 basis points to 1.75%. Due to a restrictive central bank, Commerzbank economists anticipate strengthening the Norwegian krone versus the euro.

“The NOK should be able to increase in value versus the euro if the Norges Bank sounds restrictive and announces another tasty move for September. Because the ECB is behaving tentatively and the Norges Bank is taking a challenging position against inflation, the euro is under pressure.

“Norges Bank is the more active central bank, and despite potential periods of higher risk aversion, the market should reward it with NOK strength.”

Please click here for the Market News Updates from 16 Aug, 2022.

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