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British pound falls amid US dollar strength

Friday, August 25, 2023

Today’s headlines

What’s happening: The British pound recorded losses against the US dollar and euro on Thursday.

What happened: The sterling came under pressure on Thursday after the UK released weak economic data.

Strength in the US dollar also weighed on the GBP/USD forex pair.

Why it matters: Data released on Wednesday showed a contraction in British activity for August. The S&P Global/CIPS composite PMI fell to 47.9 in August, from July’s reading of 50.8. The figure missed market expectations and was the weakest since January 2021.

The Confederation of British Industry’s monthly balance of retail sales fell 19 points to a reading of -44 in August.

The weak economic data releases increased speculations of the Bank of England not having the flexibility to raise interest rates soon. The BoE has raised rates 14 times since December 2021, to a 15-year high of 5.25%.

Strength in the US dollar also exerted pressure on the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained over 0.5% to 103.98 on Thursday.

The US dollar was supported by data showing a decline of 10,000 in initial jobless claims to 230,000 in the week ending August 19, with labour market conditions remaining tight despite the Fed’s rate hikes.

The GBP/USD forex pair fell around 1% to 1.2601 on Thursday. The pound also lost around 0.5% against the euro to reach 85.80 pence. London’s FTSE 100 gained 0.18% to close at 7,333.63.

What to watch: Traders will watch the Jackson Hole Symposium, which started on Thursday. Bank of England’s deputy governor Ben Broadbent is expected to provide further insights into the future path of monetary policy during his speech on Saturday. US Federal Reserve Chairman Jerome Powell’s speech on Friday will also remain in focus.

The markets today

Ulta Beauty will be in focus today after releasing results for the second quarter

Context: Shares of Ulta Beauty gained in after-hours trading on Thursday, following the company’s beat-and-raise quarter.

Details: The US beauty retailer witnessed resilient demand for its beauty and skincare products from higher-income consumers, despite the adverse impact of soaring borrowing costs on household budgets. There was a broader decline in demand for other discretionary products, including athletic wear and accessories.

Ulta maintained its track record of surpassing both top- and bottom-line expectations over the past ten quarters.

The company’s revenues climbed 10.1% year-over-year to $2.53 billion in the second quarter ended July 29, topping the consensus estimates of $2.51 billion. The beauty retailer reported earnings of $6.02 per share, which exceeded Wall Street expectations of $5.85 per share.

Comparable sales grew 8% year-over-year, amid 9% growth in transactions. Gross profits rose 7.1%, while SG&A expenses grew by 12.4%.

The company spent $275.5 million on repurchasing shares during the latest quarter and closed the quarter with cash and equivalents worth $388.6 million.

Management raised their full-year revenue guidance from $11-$11.1 billion to $11.05-$11.15 billion and the adjusted earnings forecast from $24.70-$25.40 per share to $25.10-$25.60 per share.

Shares of the beauty retailer gained 1.6% to $429.60 in the extended trading session, following the release of quarterly results. The stock lost 3.5% during the regular trading hours amid a broader decline in the US equity markets.

What to watch: Investors will watch inflation trends and consumer spending patterns, which are expected to impact the company’s overall results ahead.

Other Markets: US trading indices closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.08%, 1.35% and 2.19%, respectively.

The news shaping the markets

Norway said it will donate F-16 combat aircraft to Ukraine. The news sent the safe-haven US dollar index higher this morning.


Hong Kong’s trade deficit widened to $30 billion in July, from $27.6 billion in the year-ago period, exerting pressure on the HKD/USD forex pair.


US durable goods orders declined by 5.2% in July, versus 4.4% growth in June, which sent the Nasdaq 100 lower by over 300 points on Thursday.


Bank of Indonesia maintained its interest rates unchanged for the seventh straight time at its August meeting, which exerted pressure on the IDR/USD forex pair.


Argentina’s retail sales jumped 149.5% year-over-year in June, versus 148.8% growth in the prior month, which sent the ARS/USD pair slightly higher in forex trading this morning.

What else to watch today

Germany’s GDP growth rate, Ifo business climate indicator, Ifo current conditions indicator and Ifo expectations indicator, Spain’s producer prices and consumer confidence indicator, Turkey’s manufacturing confidence index, capacity utilisation and tourist arrivals, France’s initial jobless claims and unemployed persons, Brazil’s FGV Consumer confidence, current account, foreign direct investments and consumer prices, India’s Foreign exchange reserves, value of loans and value of deposits, Mexico’s GDP growth rate and current account, Canada’s wholesale sales and government budget value, as well as US University of Michigan consumer sentiment and Baker Hughes crude oil rigs.


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