Markets Await Fed, Expect Rate Hike

Sterling rallied yesterday after meeting support. Sterling-dollar regained 1.2750 after meeting support around 1.2640. Sterling-euro made progress towards 1.1400. Euro-dollar regained 1.1200 after meeting support around 1.1190.

Previous Day's Market Highlights

Sterling rallied yesterday after meeting support. Sterling-dollar regained 1.2750 after meeting support around 1.2640. Sterling-euro made progress towards 1.1400. Euro-dollar regained 1.1200 after meeting support around 1.1190.
 
Inflation in the UK rose to 2.9%, the fastest pace since 2013. Core inflation rose to 2.6% from 2.4%. According to the June ZEW Survey, Economic Sentiment dipped in Germany but rose in the Eurozone.
 
US Producer Price Index data, an indicator of inflation, came in above expectations, briefly strengthening the dollar.
 
The Canadian dollar lost some of the gains made against the pound but remains relatively strong. The rate regained 1.6800 but struggled to hold gains above 1.6900. 

 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1396 1.1760 1.1277 4.11%
GBP / USD 1.2783 1.3048 1.2635 3.17%
EUR / USD 1.1217 1.1283 1.0976 2.72%
GBP/AUD 1.6913 1.7577 1.6731 4.81%
GBP / NZD 1.7664 1.8899 1.7497 7.42%
GBP / CAD 1.6893 1.7822 1.6796 5.76%

Today's Market Highlights

UK data this morning (09:30 BST) will be closely watched ahead of tomorrow’s BoE interest rate decision. Wage growth will be key after the rate of inflation rose to 2.9% in May. Inflation has outpaced wage growth, meaning that real wages have fallen.
 
The morning continues with Eurozone Industrial Production and Employment Change (10:00 BST).
 
In the afternoon, US Retail Sales and CPI could pose a risk to the dollar, with both expected to have slowed in May (13:30 BST). Weekly EIA Crude Oil Inventories are expected to have fallen again, after unexpectedly rising last week.
 
The main event of the day is this evening’s Fed rate decision. The Fed is widely expected to raise interest rates by 25 basis points to a target range of 1.00% to 1.25%. This move has been largely priced in, so attention will largely be on forward guidance for later this year. Dollar strength will depend in large part on the tone of any guidance. 
According to the CME FedWatch Tool, markets are pricing in a 99.6% chance of a hike. 
 
Overnight, New Zealand releases Q1 GDP and Australian releases employment data

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Claimant Count Change (May) 10.0K 19.4K
09:30 GBP ILO Unemployment Rate 3M (Apr) 4.6% 4.6%
09:30 GBP Average Earnings Including Bonus 3M/Yr (Apr) 2.4% 2.4%
09:30 GBP Average Earnings Excluding Bonus 3M/Yr (Apr) 2.0% 2.1%
10:00 EUR Industrial Production w.d.a. YoY (Apr) 1.3% 1.9%
10:00 EUR Industrial Production s.a. MoM (Apr) 0.5% -0.1%
10:00 EUR Employment Change QoQ (Q1) 0.3% 0.3%
13:30 USD Retail Sales MoM (May) 0.1% 0.4%
13:30 USD Core Retail Sales MoM (May) 0.2% 0.3%
13:30 USD CPI YoY (May) 2.0% 2.2%
13:30 USD Core CPI YoY (May) 1.9% 1.9%
13:30 USD CPI MoM (May) 0.0% 0.2%
13:30 USD Core CPI MoM (May) 0.2% 0.1%
15:30 USD EIA Crude Oil Inventories (Jun 9) -2.955M 3.295M
19:00 USD Fed Interest Rate Decision 1.25% 1.00%
19:00 USD Fed's Monetary Policy Statement
19:30 USD FOMC Press Conference
23:45 NZD GDP QoQ (Q1) 0.7% 0.4%
23:45 NZD GDP YoY (Q1) 2.7% 2.7%
02:30 AUD Consumer Inflation Expectations (Jun) 4%
02:30 AUD Unemployment Rate s.a. (May) 5.7% 5.7%
02:30 AUD Employment Change s.a. (May) 10.0K 37.4K
02:30 AUD RBA Bulletin