August 15, 2022

Daily Report 15/08/2022

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There was only a limited immediate reaction to the UK GDP data, but selling pressure gradually increased ahead of the New York open as an underlying lack of confidence in the UK outlook continued to sap support. The GDP contraction for the second quarter tended to increase the focus on expectations of further contraction from late this year. Sterling was also unable to gain any support from the firm tone surrounding risk appetite and net gains in equities which was an important warning. CFTC data recorded a sharp decline in short Sterling positions to around 34,500 contracts from over 56,000 the previous week and the lowest short position for 5 months, limiting the scope for any further short covering, especially with an underlying lack of confidence in the UK outlook.

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The Euro lost ground into Friday’s New York open with an underlying lack of confidence in the Euro-Zone outlook sapping support. The German economic ministry warned that the second half outlook was considerably worse due to the gas situation while low water levels on the Rhine also posted further difficulties for the supply side of the economy.

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The US University of Michigan consumer confidence index strengthened to 55.1 for August from 51.5 the previous month and above consensus forecasts of 52.5. The current conditions index was notably weaker than expected with a retreat to 55.5 from 58.1, but this was offset by an increase in the expectations component to 54.9 from 47.3. There was some relief over an increase in confidence, although inflation data was considered as more important and mixed on the month. The 1-year inflation expectations index declined to 5.0% from 5.2%, but the 5-year index edged higher to 3.00% from 2.9%. CFTC data recorded a notable decline in aggregated long dollar positions to $13.0bn from $17.3bn previously amid expectations that the dollar trend may have turned.

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