• Lack of UK data could push focus elsewhere
  • Eurozone inflation remains stagnant
  • All eyes on US inflation numbers

Sterling struggles despite positive output numbers

The pound gave up any of Wednesday’s gains yesterday, after a positive industrial and manufacturing output release failed to ease growing uncertainty over the future of the UK economy.  A week of generally disappointing data from the UK left some investors beginning to question the likelihood of any policy change from the BoE as has been rumoured over the last few weeks. This uncertainty, combined with an ease in pressure on wider markets, saw the currency finish the day down an average of 0.3%.

A lack of economic data releases from the UK today is likely to see investor focus fall on wider markets to drive price movement. This lack of UK data could see the pound remain near its current three-week lows, especially if wider market uncertainty eases slightly.

Euro gains despite mixed data

The single currency performed well yesterday. Against the dollar it rose marginally while gaining a third of a percent against the pound. This strong move against the pound largely came as a result of a weaker pound rather than a positive euro, as investors were initially disappointed by the larger than expected fall in French industrial output.

This morning we have had the release of German and French CPI inflation data. While the French and German annualised numbers remained in line with prior at 0.8% and 1.7% respectively, the German monthly index fell by 0.4% to -0.4% for July. Despite this mixed data, while more volatile, the currency has remained broadly stable across the board. 

Dollar steady ahead of inflation number

The greenback posted a mixed performance yesterday, trading broadly flat against the euro but gaining against a weaker pound. While US initial jobless claims came out worse than expected and rose by 4,000, investor uncertainty surrounding the tension with North Korea eased slightly after the initial shock and slowed the selloff of the greenback.

Today we have the release of US CPI inflation, which is expected to rise flat to +0.2% for the month of July. If the market’s prediction ends up matching the actual outcome, we could see the dollar gain ground across the board and may see investor sentiment boosted slightly on the basis that the economy is continuing to move in a direction which could foster further rate hikes from the Fed.

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