USD dipped yesterday after the latest US Producer Price Inflation Report showed prices increased less than forecast in July. Of particular interest to traders was the revelation that the cost of services fell the most since March 2023, and that key components of the PCE (the Fed’s preferred measure of inflation) fell sharply.
This morning, the ONS released their UK July inflation report, which posted slightly weaker than forecast. Whilst the Headline and Core Inflation data came in 0.1% lower than expectations, the Headline inflation rate rose for the first time this year to record an annual rise of 2.2%, uncomfortably above the Bank of England’s 2% target. Wage growth, airfares, energy bills were amongst the contributors to the rise. Elsewhere, the New Zealand Central Bank cut interest rates to 5.25% from 5.5%. Markets are likely to remain rangebound ahead of today’s US inflation data slated for release at 1:30pm.
*Daily move - against G10 rates at 7:30am, 14.08.24
** Indicative rates - interbank rates at 7:30am, 14.08.24
The markets are eagerly awaiting the US inflation data for July due out at 1:30 pm today, where the headline rate is forecasted to come in at 2.9%, 0.1% lower than the previous reading.
USD has weakened following the recent monthly employment report, which is stirring conversation about the possibility of the Federal Reserve cutting rates by 0.50% at the upcoming September FOMC meeting. Ahead of this number, markets are currently pricing in a full 1% of interest rate cuts through to the end of the year.
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