With markets continuing to be quiet, risk appetite continued to be the driver of FX moves. Equities dropped yesterday taking GBP lower with it. USD moves were muted ahead of today's inflation numbers.
This morning data from the RICS UK house price survey showed that pessimism over UK house prices rose to the highest since 2009 – further signs of pressure on the UK’s housing market.
* Daily move - against G10 rates at 7:30am, 10.08.23
** Indicative rates - interbank rates at 7:30am, 10.08.23
Today's US inflation numbers as well as the weekly jobless claims will be on top of market participants' minds today. As ever it will be the core inflation number that will be the important number, and markets are currently expecting this number to have weakened further in July down to 4.7%. So the question is will a continued drop be enough to weaken USD? Recent jobs and consumption data has been stronger than expected, which will keep the Fed on alert still to keep interest rates higher for longer, which has supported USD from further declines this year. It seems like a big drop in the inflation numbers will likely be needed to see a significant weakness on USD.
It has been a very quiet week in the markets ahead of today’s inflation numbers from the US. As has been previously mentioned, USD has been declining since we saw inflation numbers start to drop last year, with the index now down 11.23% since its peak last year, as markets eased off peak interest rate expectations from the Fed.
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