In a speech in Cape Town last week, the BoE Chief Economist Huw Pill likened his outlook for the UK policy rates to the very famous (and very flat) Table Mountain. This subsequently encouraged the UK rates markets to revise down their bank rate outlook even though investors still seem to be expecting two additional rate hikes before the end of the year at the time of writing. Also last week, the ECB’s Isabel Schnabel and Francois Villeroy said that the outcome of the September policy meeting remains uncertain and seemingly corroborated the market expectations of a policy rate ‘skip’. More broadly, we note that the credibility of the ECB’s hawkish stance has been undermined by a stream of economic data disappointments in recent months. The hawkish rhetoric has also fuelled concerns about a potential
policy mistake by the ECB that could trigger a hard landing on the continent.
The economic data releases and policymakers’ speeches this week could attract considerable attention as FX investors start to position ahead of the September ECB and BoE policy meetings. In the Eurozone, the market focus will be on the final services PMIs for August tomorrow and retail sales for July on Wednesday as well as speeches by the ECB’s Pierre Wunsch, Robert Holzmann, Francois Villeroy, Klaas Knot, and Frank Elderson on Thursday. In the UK, the focus will be on the final UK PMIs for August tomorrow as well as the parliamentary testimony by BoE Governor Andrew Bailey on Wednesday and the release of the BoE’s decisionmaker survey on inflation expectations on Thursday. On the day, the data calendar is relatively light with only the Eurozone Sentix Investor Confidence indicator for September on the docket. The recent trading ranges could prevail as FX investors await European data and official speeches later in the week.

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