USD gains continued late in the day, despite a mixed US CPI report where the core component came in lower than expected for the 5th consecutive month. Initial USD gains were sold into, as markets actually reduced the odds of a second rate cut by the Fed this year from a 100% down to 75% probability.
At the time of writing, GBPUSD was sat at the low of June, a key support level for the pair.
*Daily move - against G10 rates at 7:00 am, 16.07.25
** Indicative rates - interbank rates at 7:00 am, 16.07.25
Following hotter than expected CPI numbers, we’re back to markets only projecting two rate cuts from the Bank of England this year. Month-on-month CPI came in at 0.3% vs the expected 0.1%; and 3.6% vs 3.4% year-on-year. Services CPI came in at 4.7%. As a result, GBP is marginally up across the board, as we wait for the job numbers tomorrow morning. In light of these numbers, we would expect the recent sell-off on GBP to ease today. Demand could well pick up the currency should we have strong job numbers in the morning.
A report overnight suggests that Kevin Hassett is the frontrunner to replace Jerome Powell as Fed Chair, and, on the tariff front, that Trump is set to impose tariffs on pharmaceuticals as early as 1st August.
PPI inflation numbers are out at 1.30pm today - a hot number could also fade second rate cut odds and give further demand for USD.
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