Sterling Falls on Softer Inflation

Sterling stumbled yesterday as inflation surprised to the downside. CPI slowed to 2.6% from 2.9% in May. Speculation had built recently that the BoE was becoming more hawkish and moving closer to raising interest rates. Softer inflation eases pressure on them to do so.

Previous Day's Market Highlights

Sterling stumbled yesterday as inflation surprised to the downside. CPI slowed to 2.6% from 2.9% in May. Speculation had built recently that the BoE was becoming more hawkish and moving closer to raising interest rates. Softer inflation eases pressure on them to do so.
 
Over the course of the day, the pound fell below 1.1300 against the euro and towards 1.3000 against the dollar, having traded around 1.3100 earlier in the day.
 
Euro-dollar continued its upwards momentum after breaking through 1.1500 for the first time since May 2016, rising to a high of 1.1584. The rate hit its 2016 high of 1.1616 that May. The dollar has been under pressure due to uncertainty over the path of Fed rate hikes and the ability of the Trump administration to pass key tax reforms.
 
Sterling-Aussie hit its lowest levels since early April after the Aussie strengthened on the RBA meeting minutes and the pound fell on soft CPI data. Sterling-loonie continued to trade around its lowest levels since March. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1308 1.1438 1.1176 2.29%
GBP / USD 1.3032 1.3120 1.2589 4.05%
EUR / USD 1.1529 1.1584 1.1127 3.95%
GBP/AUD 1.6450 1.7107 1.6386 4.21%
GBP / NZD 1.7683 1.7994 1.7338 3.65%
GBP / CAD 1.6472 1.6978 1.6354 3.68%

Today's Market Highlights

The calendar is quiet this morning. This afternoon, markets will keep an eye on US housingdata (13:30 BST) and weekly EIA Crude Oil Inventories (15:30 BST). Gains in Housing Starts and Building Permits could offer the dollar support.
 
The European Central Bank meets tomorrow. It is not expected to announce any interest rate changes but markets will keep an eye on any discussion of tapering the QE programme, signals to which effect could strengthen the euro. However, if the ECB strikes a more cautious tone or disappoints markets’ expectations, the euro could weaken. 

Overnight, employment data may weigh on the Aussie.

Today's Economic Calendar

Time Currency Release Consensus Previous
13:30 USD Building Permits MoM (Jun) 1.200M 1.168M
13:30 USD Housing Starts MoM (Jun) 1.150M 1.092M
13:30 CAD Manufacturing Shipments MoM (May) 0.8% 1.1%
15:30 USD EIA Crude Oil Inventories (Jul 14) -3.740M -7.564M
02:30 AUD Employment Change s.a. (Jun) 15K 42K
02:30 AUD Unemployment Rate s.a. (Jun) 5.6% 5.5%