UK inflation increased by 0.1% in July, a meager change from last month’s 0.0% by anyone’s measure, but an important one nonetheless. Carney has just warned that inflation could remain flat or dip into negative territory again (a prospect the market took to mean interest rates will remain on hold for the foreseeable) so this small tick up set assumptions racing. Sterling surged higher on the result yesterday morning, supported by similarly robust PPI (producer prices) and RPI (retail prices), testing the top of the range yet again against the dollar. Again, follow through was distinctly lacking as the market seems wary of taking the rates to new territory while they are still unsure exactly how next months FED decision will pan out. With no data today, sterling will perhaps struggle to find the momentum to break that range top so the risk is again of a drift back down again across the board, however there is a technical argument for GBPUSD to continue higher from here.
Today is the turn of the U.S. to post their consumer prices index and later in the evening is the minutes release from the last FED meeting. Both are potential market movers and while the U.S. Central bank have a similar remit to the BOE in terms of maintaining consistent inflation levels, it should be noted that their chosen point of reference is the PCE Price Index. Therefore while the CPI is a good for comparisons, it shouldn’t be seen as a deciding factor in whether Yellen and co will raise interest rates next month. Given the press conference at the time the minutes will also likely yield only limited further information on the prospect of action next month.
Today’s current account surplus is the only European release of note for two days straight now and will have limited influence on the currency pairs at its 9am release. Rather, the single currency will continue to move as a counter weight to strengths/weaknesses in its major counterparts. EUR/USD is creeping higher this morning from the weekly low yesterday. Danske and Barclays remain short with long term targets of 1.02 and 1.046 respectively and only a close back up around 1.15 appears to be the confirmation they would look for to change their minds.
Telegraph – Chinese stock market slides for second day.
The Times – Sterling on a high after unexpected inflation rise.
FT – Hard-left unions weigh Corbyn-led future.
Pound Sterling (GBP), Euro Currency (EUR), US Dollar (USD) exchange rates commentary is provided by Argentex (Ag-Fx.com)