Sterling held a firm tone after the UK inflation data. The marginally higher than expected figure for core inflation and an increase in services-sector inflation to a record high maintained expectations that the Bank of England would have to maintain a notably hawkish stance in order to bring inflation under control. In this context overall yield spreads continued to underpin the UK currency in global markets. The consumer confidence and retail sales data will be released on Friday.
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Euro-Zone GDP was confirmed at 0.3% for the second quarter of 2023 with the year-on-year growth rate also unrevised at 0.6%. June Euro-Zone industrial production increased 0.5% with an annual decline of 1.2%. The data was unable to make any headway after the European open and gradually drifted against the dollar as tight ranges prevailed.
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Federal Reserve minutes from the July meeting stated that most participants saw continued upside inflation risks and that more evidence was needed to be confident that inflation pressures were easing. The members added that these risks could require further interest rate hikes. Two members did favour holding rates steady at the July meeting. A number of members also said that there were risks of accidentally tightening policy too much and also considered that the economic risks were becoming more balanced. There was evidence that the labour market was becoming more balanced even though conditions were still very tight.
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