USD supported ahead of retail sales

Yesterday's currency recap

USD bounced after US producer prices surged 0.9% MoM in July (vs. the 0.2% expected) - the biggest jump in three years. Core PPI matched the pace, with analysts pointing to tariff-driven cost pressures feeding into consumer prices. Fed cut bets for September eased, with the needle firmly back to a 25bp cut versus the 20% chance of a 50bp cut prior to the numbers.

GBP reversed gains after the stronger-than-expected Q2 GDP confirmed the UK is the fastest-growing G7 economy in H1; however, but momentum faded in the afternoon.

Today's GBP rates

Key data points

What we think

Yesterday’s US PPI surprise gave USD short-term tailwind. However, today’s retail sales are the real test of consumer strength. Any upside surprise would embolden USD buyers and keep USD supported into the weekend.

GBP still faces headwinds from weak growth momentum and autumn budget concerns, while EUR’s bounce looks fragile below key resistance.

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