In the absence of any major economic data, currency markets traded in a fairly narrow range yesterday. Sterling continued to grind higher against the US dollar after Bank of England Governor Bailey reiterated the Bank’s commitment to bring inflation back down to target, although moving forward he did state he expects inflation to decrease significantly.
Yesterday’s Mansion House Speech was largely uneventful with the Chancellor stating the UK Government will be “Working with the Governor and the Bank of England, and we will do what is necessary for as long as necessary to tackle inflation persistence and bring it back to the 2% target”. He also announced plans to launch the “Mansion House Reforms” aimed at boosting pensions by over £1,000 per annum. The market’s main focus this week will be tomorrow’s key US inflation data which is expected to show annual headline inflation easing back to 5% from the prior 5.3% reported last month.
* Daily move - against G10 rates at 7:30am, 11.07.23
** Indicative rates - interbank rates at 7:30am, 11.07.23
Sterling trades at 15-month highs versus the US Dollar after employment data released this morning once again showed wages rising above expectations, vindicating the Central Bank’s tight monetary policy, although the unemployment rate unexpectedly ticked higher from 3.8% up to 4%, and payroll estimates fell for the first time since February 2021.
Broader market sentiment has been boosted overnight by news out of China that they will extend property support measures to aid their slowing economy. Currency markets are once again likely to take their cue from the market’s improved risk appetite with the safe-haven dollar taking a backstage. Elsewhere, tomorrow will see Central Bank interest rate decisions from New Zealand where rates are forecast to remain unchanged, and Canada where rates are expected to be hiked by 0.25%.
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