Sterling Stumbles Again

Sterling hit a new low against the USD as CPI missed estimates. UK Retail Sales, politics, and US data are in focus today.

Previous Day's Market Highlights

Sterling-dollar fell below June’s seven-month low of 1.3049 to hit a new low since September but has so far managed to hold onto the 1.30 level and avoid a drop into the 1.20s. The renewed decline in the pound came as CPI data missed estimates—notably core inflation fell below 2%–which weighed on interest rate hike expectations. Prior to the data, markets had been increasingly pricing in an August rate hike.
Sterling-euro also suffered losses and hit its lowest levels since March, briefly dipping below 1.12. However, it’s worth noting that sterling-euro has been trading in a fairly tight range in recent months: a wider band of around 1.11 to 1.16 has been seen at times, but 1.12-1.15 has been the main range.  
The pound saw some support last night on reports that Brussels could consider an Article 50 extension, but it remained relatively subdued. Elsewhere, Fed Chair Powell’s second day of testimony was consistent with the first and therefore had little market impact. The Aussie gained overnight on a positive labour market report, which saw both Employment Change and the Participation Rate beat expectations.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1225 1.1461 1.1196 2.31%
GBP/USD 1.3048 1.3363 1.3010 2.64%
EUR/USD 1.1624 1.1791 1.1510 2.38%
GBP/AUD 1.7632 1.7981 1.7569 2.29%
GBP/NZD 1.9276 1.9622 1.9112 2.60%
GBP/CAD 1.7199 1.7791 1.7196 3.34%

Today's Market Highlights

UK data releases continue today with Retail Sales (09:30 BST), which poses the next potential risk for the pound. Brexit uncertainty remains an ongoing threat to the pound’s strength.
The US releases mid-level data in the afternoon, with some dollar strength possible as weekly Initial Jobless Claims are forecast to remain little changed and the Philadelphia Fed Manufacturing (13:30) to pick up pace. However, the overall impact may be relatively limited. Fed member Quarles is giving the opening remarks via a pre-recorded video at the Alternative Reference Rates Committee Roundtable.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP Retail Sales YoY (Jun) 3.9% 4.4%
9:30am GBP Core Retail Sales YoY (Jun) 3.7% 4.4%
9:30am GBP Retail Sales MoM (Jun) 0.4% 1.3%
9:30am GBP Core Retail Sales MoM (Jun) 0.3% 1.3%
1:30pm USD Initial Jobless Claims (9 Jul) 220K 214K
1:30pm USD Philadelphia Fed Manufacturing Survey (Jul) 22.0 19.9
2:00pm USD Fed's Quarles Speaks