Sterling has fallen about 0.9% since its post-CPI peak against the dollar on Wednesday. Sales numbers have left the pound on the back foot this morning, with a 1.2% decrease in June, significantly worse than the 0.6% forecast, and this is mostly due to cooler weather. This reduces sales on a net basis in Q2 and should be somewhat of drag on economic growth.
People are becoming more hopeful about the possibility of near-term rate reduction from the Bank of England. With no further data for markets to digest today, speculators will turn their attention to the next round of PMI releases early next week.
The ECB did provide some assistance for the euro. With core inflation rising and some officials expressing regret over the first rate cut last month, the rate pause at 3.75% shocked no one.
Markets are still expecting a second rate decrease in September, which Lagarde described as a wide-open meeting. Aside from some current account data this morning, the focus will shift to next week’s PMIs and today’s dollar dynamics.
This afternoon, we have a handful of Fed speakers to wrap up the week before the emphasis shifts to GDP and core PCE inflation next week.
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