The pound performed well yesterday, gaining 0.8% against the dollar following dovish comments from the US Fed and 0.6% against the euro. The only real data release for the UK yesterday was RICS housing data, which fell eight points further than expected, cementing the cautious outlook of many investors regarding the UK housing market the closer we get to Brexit.
Despite this poor data release investor sentiment towards sterling rose as comments from a junior Brexit minister assured investors that the UK would not pay a penny above the bare minimum required to leave the EU.
A lack of economic data releases today could see the pound struggle for traction. However, the potential for poor data in wider markets could allow the currency to continue its run of strength.
The single currency struggled yesterday, losing nearly 0.6% against the pound and 0.2% against the dollar. Stagnant French and German CPI inflation left investors feeling uncertain that the recent positive ECB comments surrounding a Eurozone recovery were justified. Many were questioning the likelihood that the central bank could taper the current easing programme, given the lack of rising inflation.
This morning we have had the release of Italian CPI inflation and consumer prices, which remained stagnant at 1.2% a piece. Once again this stagnant figure has provided the single currency with limited support, and could see the currency continue to be pushed around by wider market pressures.
The greenback posted a mixed performance yesterday, gaining 0.2% against the euro but losing nearly 0.9% against the pound. Positive data from the UK combined with a disappointing weekly jobless claims result, as well as the memory of a dovish Janet Yellen from the day, before left the dollar struggling to stabilise.
Today we have a number of key data releases, which could see the dollar regain some of its lost ground. CPI inflation is predicted to rise by 0.2% and return to positive figures; retail sales are expected to rise by nearly half a percent to +0.1%, as is industrial output. The only negative expectation is for University of Michigan Sentiment data, which is predicted to a fall a negligible 0.1 for July.
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