Energy and strikes continue to dominate

World Markets

Last week Europe seems to have been at both the mercy and peril of the hot weather. With the UK producing a jump in retail sales in July, and the river Rhine proving to cause trade issues, leaving vessels in standstill traffic and some cases stranded due to the lack of rainfall. This week’s calendar will bring another tumultuous week of trading with Monday’s focus on the Bank of China’s interest rate decision, and then on Tuesday, eyes will be on Germany’s Composite and Manufacturing PMIs.

GBP
After the CPI figures for July surged to a 40-year high last week, GBP has opened weak against the dollar in particular, following the news from across the pond that a recession may be avoided in the states last week.

Meanwhile, a second day of strike action is underway at the UK’s busiest container port after workers walked out on Sunday in a pay dispute. The Union Unite said around 1,900 of its members were striking, expected to last eight days, at the Port of Felixstowe in Suffolk. If the strike continues as planned there is great concern about the impact of the strike on shipping companies and the delay in imports being received. With companies looking elsewhere within the UK to receive the shipments at alternative shipping ports.

Additionally in the UK, with Inflation set to hit 13% by the end of 2022, the conversation around the cost of living continues with under the ’30s facing a growing cost of renting crisis with statistics showing 4 in 10 of this age group are now spending more than 30% of their pay on rent. Making rental costs unaffordable and extremely concerning as a recession continues to loom. For the Economic calendar, attention is on the PMI data released this week for the UK, Europe and US.

EUR
EUR/USD today has fallen below parity as the market opens this morning, with the US dollar continuing to rally from the previous week’s hawkish Fed expectations. The euro continues to look vulnerable, hitting a 5-week dip with Russia announcing a three-day halt to the European gas suppliers via the Nord Stream 1 pipeline again at the end of August, deepening the EU energy crisis. As well as recession and inflation risks continuing to spiral as the Euro weakens further.

Eyes are on Germany’s composite and manufacturing PMI data released this week. Which could continue to weaken the Euro further if a negative outcome.

USD
After a strong week for USD, hitting a 5-week high, this week we could see the save haven currency strengthen even further after the Feds hawkish announcement of the states (somehow) avoiding the expected global recession. All eyes remain on the Fed policy makers speaking at Jackson Hole this week ( 25-27th Aug) with Fed speakers stressing the message that more rate hikes are coming given “The fight against inflation has not yet been won,” amid growing expectations for Fed Chair Jerome Powell to stress that tightening is “still a long way from the end,” Markets are predicted to remain strong amid Chinese stimulus bets and the European energy crisis.