GBP Looks to Employment Data After CPI Disappoints

Sterling fell after UK CPI came in shy of expectations, holding steady at 2.6%. Sterling-dollar dropped below 1.2900 for the first time since 13 July, a one-month low, falling towards 1.2850 as US Retail Sales surprised to the upside. Euro-dollar fell around 0.4% on the release, briefly dipping below 1.1700.

Previous Day's Market Highlights

Sterling fell after UK CPI came in shy of expectations, holding steady at 2.6%. Sterling-dollar dropped below 1.2900 for the first time since 13 July, a one-month low, falling towards 1.2850 as US Retail Sales surprised to the upside. Euro-dollar fell around 0.4% on the release, briefly dipping below 1.1700.
 
Sterling-euro followed lower, dropping back below 1.1000 to a new low since the flash crash or, excluding the crash, since 2010.
 
An acceleration in the UK’s inflation to 2.9% in May and rising dissent amongst the MPC in June had increased speculation of a nearing rate hike. Slower inflation that holds within the tolerable overshoot of the target 2% rate may limit calls for the Bank to hike, thereby weighing on the pound.
 
The kiwi and Aussie dollars fell further against the pound as the US dollar gained. Another decline in dairy prices added to pressure on the kiwi. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.0958 1.1324 1.0949 3.31%
GBP / USD 1.2855 1.3272 1.2846 3.21%
EUR / USD 1.1730 1.1912 1.1479 3.63%
GBP/AUD 1.6401 1.6743 1.6269 2.83%
GBP / NZD 1.7770 1.7929 1.7398 2.96%
GBP / CAD 1.6394 1.6727 1.6238 2.92%

Today's Market Highlights

Employment data may offer the pound limited support this morning, with Claimant Count Change forecast to have slowed in July. Unchanged wage growth and unemployment rate figures may provide little support and the pound remains vulnerable to downside pressure.
 
Q2 Eurozone GDP is expected to hold steady at 0.6% growth, which may see a relatively muted impact on the euro.
 
In the afternoon, the dollar may pick up on positive housing data. After the close of European markets, traders will keep an eye on the Fed’s meeting minutes. The minutes will be closely watched for any additional clues as to the timing of the next Fed rate hike and the Fed’s plans for winding down its balance sheet.
 
According to the CME FedWatch Tool, markets are now pricing in just under a 50% chance that the Fed will hike rates in December. 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Claimant Count Change (Jul) 3.7K 6.0K
09:30 GBP ILO Unemployment Rate 3M (Jun) 4.5% 4.5%
09:30 GBP Average Earnings Including Bonus 3M/Yr (Jun) 1.8% 1.8%
09:30 GBP Average Earnings Excluding Bonus 3M/Yr (Jun) 2.0% 2.0%
10:00 EUR Preliminary Eurozone GDP s.a. YoY (Q2) 2.1% 2.1%
10:00 EUR Preliminary Eurozone GDP s.a. QoQ (Q2) 0.6% 0.6%
13:30 USD Housing Starts MoM (Jul) 1.220M 1.215M
13:30 USD Building Permits MoM (Jul) 1.250M 1.254M
13:30 CAD Foreign Securities Purchases $23.45B $29.46B
15:30 USD EIA Crude Oil Inventories -3.058M -6.451M
19:00 USD Fed Meeting Minutes
02:30 AUD Employment Change s.a. (Jul) 20K 14K
02:30 AUD Unemployment Rate s.a. (Jul) 5.6% 5.6%