GBP Looks to CPI, Brexit Headlines

CPI and Brexit headlines are to drive the pound today.

Previous Day's Market Highlights

Sterling came under pressure yesterday amidst recent Brexit headlines and as Bank of England Governor Carney cautioned on the economic risks of a no-deal Brexit scenario during his testimony on the Financial Stability Report. UK labour market data were largely in line with expectations, keeping open the door for a possible August rate hike. Meanwhile, the dollar saw a bid tone as Fed Chair Powell testified, and this pushed sterling-dollar lower towards 1.31 and euro-dollar below 1.17.  
 
The first day of Fed Chair Powell’s semi-annual testimony contained little new information as he reiterated the need for a gradual rise in interest rates and was upbeat on the labour market and the economy.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1253 1.1461 1.1234 1.98%
GBP/USD 1.3090 1.3363 1.3049 2.35%
EUR/USD 1.1632 1.1791 1.1510 2.38%
GBP/AUD 1.7808 1.7981 1.7472 2.83%
GBP/NZD 1.9389 1.9622 1.8932 3.52%
GBP/CAD 1.7328 1.7791 1.7168 3.50%

Today's Market Highlights

A gain in the Consumer Price Index today could further support market expectations of a possible August bank rate hike (09:30 BST) and see some sterling strength. However, Brexit headlines continue to pose a downside risk as the preferred October deadline for a Brexit deal nears. After falling below 1.31, sterling-dollar is eyeing the lows of 1.3049 it hit in late June.

Final Eurozone CPI (10:00) is forecast to confirm headline inflation hit 2% in June while core inflation remained subdued at 1%; a lack of revision may have a muted impact.
 
In the afternoon, the dollar will keep an eye on housing data (13:30) and the second day of Fed Chair Powell’s testimony (15:00). The impact of the latter will likely be limited given Fed Chair Powell’s testimony is unlikely to have changed since yesterday.
 
Overnight, a pick-up in Employment Change could provide the Aussie with support. Australia’s Unemployment Rate is expected to remain steady at 5.4%.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:00am GBP Consumer Price Index YoY (Jun) 2.6% 2.4%
9:30am GBP Core CPI YoY (Jun) 2.2% 2.1%
10:00am EUR CPI YoY (Jun) 2.0% 2.0%
10:00am EUR Core CPI YoY (Jun) 1.0% 1.0%
1:30pm USD Housing Starts MoM (Jun) 1.32M 1.35M
1:30pm USD Building Permits MoM (Jun) 1.330M 1.301M
3:00pm USD Fed Chair Powell's Testimony
3:30pm USD EIA Crude Oil Inventories -3.495M -12.633M
7:00pm USD Fed's Beige Book
1:30am AUD NAB Business Confidence QoQ (Q2) 7
2:30am AUD Unemployment Rate s.a. (Jun) 5.4% 5.4%
2:30am AUD Employment Change s.a. (Jun) 17K 12K

Caxton