Dollar Firms Again; UK Data Remain in Focus

UK data remain in focus with CPI figures out this morning. The dollar has firmed against the euro and the pound this morning.

Previous Day's Market Highlights

Sterling picked up briefly in the morning but lost ground around a mixed labour market report that saw the Unemployment Rate fall to 4.0%, the lowest since 1975, and wage growth slow to 2.4% including bonuses and 2.7% excluding bonuses. A surprise to the upside in Eurozone GDP figures provided the euro with some general support in the morning session. Growth was revised higher to 0.4% quarter-on-quarter and 2.2% year-on-year.
 
Overall, sterling-euro continued to trade around 1.12. Sterling-dollar made a brief foray above 1.28 before returning back to the 1.27-1.28 range it’s largely held within since Friday. Euro-dollar traded either side of 1.14 before eking out a new low in the afternoon session.
 
Overnight, Australian wage data came in in line with forecasts, rising to 0.6% quarter-on-quarter and holding steady year-on-year. The data had a muted impact on the Aussie.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1218 1.1294 1.1073 1.96%
GBP/USD 1.2722 1.3213 1.2723 3.71%
EUR/USD 1.1340 1.1750 1.1317 3.69%
GBP/AUD 1.7592 1.7825 1.7284 3.04%
GBP/NZD 1.9403 1.9457 1.9077 1.95%
GBP/CAD 1.6634 1.7347 1.6596 4.33%

Today's Market Highlights

Today is Assumption Day in several countries, including Belgium, France, Greece, Portugal, and Spain. The dollar has seen a bid tone this morning, pushing euro-dollar back below 1.14 and briefly pushing sterling-dollar just below 1.27 for the first time since June 2017. Markets will continue to keep an eye on the latest geopolitical headlines.
 
On the data side of things, the UK’s busy calendar week continues with the release of the latest inflation figures (09:30 BST). Headline CPI is forecast to have increased to 2.5% from 2.4% and core CPI to have stayed steady at 1.9%. This could see some support for the pound as higher inflations supports the case for raising interest rates, but since another rate hike isn’t expected until 2019, it would likely do little to shift hike expectations. The greater risk may be to the downside if the release disappoints forecasts.
 
In the afternoon, slower Retail Sales and Industrial Production could weigh on the dollar (13:30, 14:15), while Capacity Utilization is forecast to have increased from 78.0% to 78.2%. Overnight, Australia releases July employment data. A projected increase the Unemployment Rate and a lower Employment Change figure could weaken the Aussie.

Today's Economic Calendar

Time Currency Release Consensus Previous
24HR EUR Assumption Day
9:30am GBP CPI YoY (Jul) 2.5% 2.4%
9:30am GBP Core CPI YoY (Jul) 1.9% 1.9%
1:30pm USD Retail Sales MoM (Jul) 0.1% 0.5%
1:30pm USD Core Retail Sales MoM (Jul) 0.3% 0.4%
1:30pm USD Nonfarm Productivity (Q2) 2.3% 0.4%
2:15pm USD Industrial Production MoM (Jul) 0.3% 0.6%
2:15pm USD Capacity Utilization (Jul) 78.2% 78.0%
2:00am AUD Consumer Inflation Expectations (Aug) 3.9%
2:30am AUD Unemployment Rate s.a. (Jul) 5.5% 5.4%
2:30am AUD Employment Change s.a. (Jul) 27.3K 50.9K

Caxton