GBP
Surging UK inflation has undermined the UK’s economic growth prospects, and this will weigh on the British Pound going forward.
The UK reported year-on-year inflation leapt to 10.1% in July, which was higher than investors were expecting and suggests the country is now well on track to meet the Bank of England’s prediction for inflation to peak near 13%.
Tomorrow’s UK consumer confidence and retail sales data will provide further evidence on the impact of the ongoing cost of living squeeze.
USD
Data-wise, the headline number for July retail sales missed slightly versus forecast. However, the underlying data indicate a solid start to Q3 for the all-important consumer side of the US economy.
Meanwhile, the release of the Fed minutes from their July meeting (when they hiked rates by 75bps) was closely followed by markets.
Overall, the minutes highlighted that the extent of the next rate hike will be very much data-dependent. Futures contracts suggest the market is pricing at least 50bps of a rate hike from the Fed next month.
EUR
Today’s Eurozone CPI data for July is a second reading. It is not expected to be revised from the initial estimate of 8.9% – a new record high.
This provided support for the ECB’s decision to opt for a larger rate increase last month rather than the expected move of 25bp. It also highlights the dilemma that the ECB faces in deciding how much to raise rates in September in the face of rising growth risks.
If you or your company are impacted by currency risk please reach out to speak to one of our experts, we can assist with decision-making during this difficult time to help you protect your profits.