The British Pound may decline if July’s UK inflation data falls short of expectations but downside follow-through could prove limited after six weeks of losses.
Talking Points:
Pound May Decline on Soft UK CPI But Follow-Though May Be Lacking
NZ Dollar Swoons as Weak 2Q PPI Data Dents RBNZ Rate Hike Outlook
Aussie Dollar Gains on Risk Appetite Swell After Status-Quo RBA Minutes
UK CPI figures headline the economic in European hours. Consensus forecasts suggest the headline year-on-year inflation rate will slow to 1.8 percent in July, marking a slowdown from the 1.9 percent print recorded in the prior month. UK price-growth data has tended to underperform relative to analysts’ expectations since the beginning of the year, opening the door for a downside surprise.
Such an outcome is likely to weigh on BOE rate hike speculation, pushing the British Pound lower. Follow-through may be limited however. Sterling has been fallen for six consecutive weeks alongside front-end bond yields, suggesting markets have been trimming tightening bets for some time now. Such one-sided price action warns that big-splash volatility risk may be asymmetrically tilting to the upside in the near term.
The New Zealand Dollar underperformed in Asian trading hours, sliding as much as 0.6 percent on average against its leading counterparts. The move reflected softening RBNZ rate hike expectations after second-quarter PPI data proved soft, as expected. Indeed, the Kiwi’s slide tracked a drop in the benchmark New Zealand 10-year bond yield.
The Australian Dollar rose after the release of minutes from Augusts’ RBA meeting. While the document didn’t contain anything particularly novel, the passing of the day’s event risk seemed to clear the way for the sentiment-linked Aussie to catch up with building risk appetite overnight. The MSCI Asia Pacific regional stock index added 0.6 percent, hinting at stronger demand for return-seeking assets (including the Australian unit).
FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
Recommended Content
Editors’ Picks
EUR/USD: Federal Reserve and Nonfarm Payrolls spell action this week
The EUR/USD pair temporarily reconquered the 1.0700 threshold last week, settling at around that round level. The US Dollar lost its appeal following discouraging United States macroeconomic data indicating tepid growth and persistent inflationary pressures.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold: Strength of $2,300 support is an encouraging sign for bulls
Gold price started last week under heavy bearish pressure and registered its largest one-day loss of the year on Monday. The pair managed to stage a rebound in the second half of the week but closed in negative territory.
Ethereum fees drops to lowest level since October, ETH sustains above $3,200
Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.