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Pounds slides as UK inflation stays at 2.4%

Published: Thursday 19 July 2018

  • Australian Dollar benefits from jobs data
  • Trade war threat on the mind of the Fed
  • Pound awaiting news from next round of Brexit negotiations
​​By Killian Greenwood

Sterling weakened yesterday as UK inflation data came in softer than expected. Markets had anticipated that Consumer Price Inflation (CPI) would rise to 2.6% after the recent rises in oil prices. It was actually reported at 2.4% which makes it less likely that the Bank of England will raise interest rates as soon as August. Attention will now turn to retail sales data due this morning.

 Australian Dollar benefits from jobs data

The Australian Dollar strengthened this morning after significantly better than expected job data. The Australian Dollar surged broadly as June employment data came in strong on all fronts. Headline jobs growth jumped to 50.9k seasonally adjusted, well above expectation of 16.6k. However, any strength against the US Dollar has been limited so far. The Reserve Bank of Australia is clear that its next move will likely be a rate hike, yet there is no strong case for a move in the short term.

Trade war threat on the mind of the Fed

Overnight, the Federal Reserve Chair Jerome Powell’s second day of Congressional Testimony at the House Financial Services Committee contained no surprises. On inflation, he said “from this point forward the risks are roughly balanced” even though he’s still “slightly more worried about lower inflation.”

On employment, he said that the US is “close to full employment” but “maybe not quite there yet”. And he added “we need more people who are going to fill these jobs that are going to be coming open.” Powell also refrained from commenting on the administration’s trade policy directly. But he still noted that “the bottom line is, a more protectionist economy is an economy that’s less competitive, and it’s less productive.” And he warned that “you want to be careful to walk along this path because it may not be so easy to get off it,” Mr Powell is keen not to comment on any policy that he does not make, but it is clear that he is concerned of the threat of a growing trade war.

Pound awaiting news from next round of Brexit negotiations

The UK's new Brexit secretary Dominic Raab will hold his first talks with the EU's chief negotiator Michel Barnier in Brussels this afternoon. It now falls on Raab - part of the winning Leave campaign in the 2016 EU referendum - to continue the negotiations with Barnier.  Brexit negotiations will be the main driver of the Pound in the coming weeks and developments will be watched very closely.

What to watch out for today

This afternoon sees US Jobless Claims, the Philadelphia Federal Business Outlook and the US Leading Index.

How do billboards talk?
Sign language.
What lies at the bottom of the sea shaking?
A nervous wreck.

What did the mayonnaise say when the refrigerator door was opened?
Close the door, I’m dressing.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Retail Sales 1.3% 0.1%
CAD 13:30 Canada: Philly Fed Manufacturing Index 19.9 21.6
USD 13:30 US: Unemployment Claims 214k 220k
USD 15:00 US: Conference Board Leading Index 0.2% 0.4%

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news