Euro extends gains against British Pound as Eurozone inflation accelerates

EUR/GBP appreciated for the fifth day in a row, reaching session highs above 0.8550.
Eurozone final HICP figures confirm that price pressures accelerated in July.
In the UK, hotter CPI and soft employment figures have left the Pound on the defensive.

Guillermo Alcala FXStreet

The Euro (EUR) trades higher against the British Pound (GBP) on Wednesday, on track for a five-day winning streak, and received additional support after Eurozone final inflation figures confirmed higher price pressures in July. The EUR/GBP has reached session highs at 0.8560 after bouncing from last week’s lows, at 0.8530.

Eurozone’s final Harmonised Index of Consumer Prices (HICP) confirmed preliminary data pointing to an acceleration to a 2.9% year-over-year (Y-o-Y) rate in July, from 2.8% in June. Likewise, the Core HICP ticked up to a 2.5% Y-o-Y growth rate in July from 2.4% in the previous year.

Month-over-month, the HICP bounced up to a 0.2% gain after a 0.1% contraction in June, while the core HICP remained flat for the second consecutive month.

These figures strengthen the case for an interest rate hike by the European Central Bank (ECB) in September, particularly after ECB official and Finnish Central Bank Governor Olli Rehn reiterated earlier on Wednesday that “keeping inflation expectations anchored is essential”

UK data shows hotter inflation and a softer labour market

Earlier on the day, UK Consumer Price Index (CPI) data revealed that inflation accelerated to a 0.3% rate in July, from 0.1% in May and 2.9% year-over-year (Y-o-Y) from 2.6% in the previous month, in line with market expectations.

The Core CPI grew at a 2.6% Y-o-Y rate, unchanged from the previous month, against the market consensus for a slowdown to a 2.5% yearly rate. The impact of these figures on the Pound, however, was minimal.

These figures follow a mixed UK employment report which put the Pound under pressure on Tuesday. The ILO Unemployment Rate remained steady against expectations of a slight decline, employment growth slowed down, the number of jobless claimants declined unexpectedly, and wage growth accelerated after having remained steady over the previous three months.

(This story was corrected on August 19 at 10:33 GMT to say the UK employment report put the Pound under pressure on Tuesday, and not on Monday, as previously stated.)

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

Economic Indicator

Core Harmonized Index of Consumer Prices (YoY)

The Core Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, – released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Core HICP excludes volatile components like food, energy, alcohol, and tobacco. The Core HICP is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

GBP/USD clings to recovery gains near 1.3550 after UK CPI data

GBP/USD holds recovery near 1.3550 in European trading hours on Wednesday. The UK annual Consumer Price Index (CPI) inflation picked up to 2.9% in July, meeting estimates, while core CPI rose by 2.6% YoY in July versus 2.5% expected. Mixed UK inflation data failed to provide any impetus to the British Pound.

EUR/USD advances to 1.1600 as USD slips ahead of Fed Minutes

EUR/USD stretches higher toward 1.1600 in Wednesday's European session. The US Dollar resumes its downside as weak US economic data weigh on expectations of tighter Federal Reserve policy. Traders will take further cues from ECB President Christine Lagarde’s speech and the FOMC Minutes later in the day.

Gold climbs back above $4,350 as USD remains depressed ahead of FOMC Minutes

Gold climbs back above $4,350 during the first half of the European session, reversing a part of the previous day's heavy losses. The US Dollar attracts some sellers, and for now seems to have stalled this week's goodish recovery from a two-month low, which is seen as a key factor supporting the commodity. Bulls, however, might opt to wait for more cues about the US Federal Reserve's future policy path before placing fresh directional bets on the non-yielding yellow metal.

Shiba Inu's recovery hinges on key support

Shiba Inu recovers slightly, trading at $0.0000044, after finding support around the critical level earlier this week. The dog-themed meme coin shows improving sentiment as social dominance rises, funding rates turn positive, and bullish traders increase their long positions. On the technical side, SHIB suggests a potential recovery if it holds above the key $0.0000043 level.

Minutes of the July FOMC meeting serves as one of today’s economic highlights

Bear steepening turned into bear flattening in Europe yesterday. Daily changes on the German yield curve ranged between +2.4 bps (30-yr) and +5 bps (2-yr). EU swap rates added 0.9 bps (30-yr) to 4.5 bps (2-yr). The US/Iran stalemate and higher energy prices offer a first explanation.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.