Sterling Awaits CPI Data

Sterling pulled back from late Friday highs ahead of the start of the second round of Brexit negotiations. Sterling-dollar eased back from 1.3100 but held clear of 1.3000. The euro jumped against both the pound and the dollar overnight. Euro-dollar broke 1.1500 for the first time since 4 May 2016. Sterling-euro fell back below 1.1400.

Previous Day's Market Highlights

Sterling pulled back from late Friday highs ahead of the start of the second round of Brexit negotiations. Sterling-dollar eased back from 1.3100 but held clear of 1.3000. The euro jumped against both the pound and the dollar overnight. Euro-dollar broke 1.1500 for the first time since 4 May 2016. Sterling-euro fell back below 1.1400.    
 
Headline Eurozone CPI was unrevised at 1.3% while core CPI was unrevised at 1.2%, versus forecasts of a downwards revision to 1.2%.
 
The US dollar came under pressure on uncertainty over both the path of Fed rate hikes and the ability of Trump’s administration to pass tax reforms given the difficulties it has faced with healthcare reforms.  
 
The kiwi fell overnight after Q2 CPI slowed more than forecast. The Aussie jumped on the RBA minutes, which included a discussion of the estimated neutral interest rate.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1363 1.1444 1.1176 2.34%
GBP / USD 1.3097 1.3120 1.2589 4.05%
EUR / USD 1.1527 1.1538 1.1119 3.63%
GBP/AUD 1.6543 1.7107 1.6612 2.89%
GBP / NZD 1.7794 1.7899 1.7338 3.13%
GBP / CAD 1.6553 1.6978 1.6354 3.68%

Today's Market Highlights

The key data of the day is this morning’s price data from the UK (09:30 BST). The Consumer Price Index is forecast to have picked up 2.9% in June, the same pace seen in May and the fastest level since 2013.
 
Recently, a pickup in inflation has weighed on the pound given the negative impact on real wages as wage growth lags. Steady or slower inflation could therefore support the pound.
 
Other releases to keep an eye on include Economic Sentiment in the Eurozone and Germany (10:00), a slowdown in which could weigh on the euro, although the release tends to have a more limited market impact.
 
The US releases Export and Import Price Indices (13:30 BST) and New Zealand dollar traders will keep an eye on the Global Dairy Trade Price Index.
 
BoE Governor Carney speaks at the unveiling of the new £10 note (14:30 BST). Barring any insight into the direction of monetary policy, this may have limited market impact.

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Core Consumer Price Index YoY (Jun) 2.6% 2.6%
09:30 GBP Consumer Price Index YoY (Jul) 2.9% 2.9%
10:00 EUR German ZEW Economic Sentiment 18.0 18.6
10:00 EUR Eurozone ZEW Economic Sentiment 37.2 37.7
13:30 USD Export Price Index YoY (Jun) 1.4%
13:30 USD Import Price Index YoY (Jun) 1.3% 2.1%
14:30 GBP BoE Governor Carney Speaks
15:00 USD NAHB Housing Market Index (Jul) 67 67
NZD Global Dairy Trade Price Index -0.4%