Positive Data Strengthens Pound

GBP

The Pound appeared to flicker into life following positive labour-market data, but quickly reversed the gains. Optimism that stronger wages growth indicated a tight labour market and potential for increased consumer spending was offset by the high degree of uncertainty with so many workers still on furlough. Also, there were doubts that the Bank of England would change monetary policy in the near-term.

Coronavirus developments and delays to lockdown easing and it’s knock on effects  were still a market concern. Sterling dipped below 1.4050 to the Dollar but recovered ground after the US market open around midday. Sterling closed just below 1.4100 against the Dollar while the Euro traded above 1.1630.

This morning the main inflation rate, CPI,  increased to 2.1% for May from 1.5% previously and above consensus forecasts of 1.8%. The core rate (excluding energy and food) also increased to 2.0% from 1.3% previously. The Pound edged higher after the data, although the overall reaction was muted as it traded just below 1.4100 to the Dollar.

 

USD

The New York Empire manufacturing index declined to 17.4 for June from 24.3 the previous month and below consensus forecasts of 23.0. There was also a sharp slowdown in the rate of growth for new orders, production and unfilled orders. Employment growth slowed on the month while price pressures remained elevated, with only a slight slowdown in prices paid from record highs posted last month.

The dollar was unable to gain any traction later in the day and retreated slightly from 1-month highs with it settling at 1.2125 against the Euro around the time of New York market close. 

 

EUR

The Euro retreats back to around the 1.2100 level against the Dollar, marking the first daily loss in three, as we begin Wednesday’s European session. That said, the currency pair struggles for any meaningful direction as the market awaits the Fed meeting later in the day. 

 

Data to watch

07:00 – GBP – CPI

15:30 – USD – Crude Oil Inventories 

19:00 – USD – FOMC Economic Projections

19:00 – USD – FOMC Statement

19:00 – USD – Federal Funds Rate 

19:30 – USD – FOMC Press Conference