- Sterling had a solid day yesterday, with GBPUSD finally rallying past 1.30 to trade as high as 1.3044 after June’s inflation report came in slightly above consensus. The print which came in at 2%, was partly blamed on the Taylor Swift effect, with hotels and restaurants boosting prices. Whilst the release was inline with the BoE’s forecasts it was a little above the 1.9% that markets were expecting and pushed the odds of an August cut lower, suggesting that if the BoE were to reduce the base rate on 1st August it would be deemed as a hawkish cut. The pound is steady this morning, consolidating around 1.30 after UK wages data, released earlier today slowed in line with estimates. Average weekly earnings excluding bonuses decelerated to 5.7% y/y as estimated. Wage growth has slipped below 6% for the first time in over a year and a half, suggesting a cooling in the labor market in the UK. As expected, the unemployment rate held at 4.4%, which is the highest rate since 2021. Tomorrow’s Retail Sales data wraps up the UK’s economic releases for the week and will be scrutinised along with the latest inflation report as both the MPC and markets try to figure out the timing of the first interest rate cut from the BoE.
- The Japanese yen was a big mover yesterday, helping to push the dollar index to its lowest level since May. The JPY had been making gains after recent intervention and further benefitted from comments from former President, Donald Trump, who said that “we have a big currency problem because the depth of the currency now in terms of strong dollar, weak yen, weak yuan, is massive.”
- Today’s ECB meeting will likely be a non-event, with officials previously signalling that a September rate cut remains on the cards. President Christine Lagard will hold her post meeting press conference and will likely continue her recent rhetoric as EURUSD continues to consolidate in the low 1.09’s.
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