Sterling overall was unable to make further headway during Wednesday with a hawkish Bank of England stance priced in and markets also fretting over the impact of higher interest rates on the economy. Global developments tended to dominate with the important US inflation release. Sterling posted further gains against the dollar as the US currency dipped sharply after the inflation data. Gains in equities also had a positive influence, although there was resistance against the US currency. UK GDP declined 0.1% for May compared with expectations of a 0.3% decline with no growth on a 3-month basis, although industrial production declined.
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The Euro edged lower into Wednesday’s New York open with reservations over buying the single currency further ahead of the US inflation data, but it held against the US dollar as US currency sentiment remained fragile. ECB chief economist Lane stated that the full economic impact of tightening will play out over the next couple of years.
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US consumer prices increased 0.2% in June, slightly below expectations of a 0.3% increase. The year-on-year inflation rate declined sharply to 3.0% from 4.0% amid a favourable base effect which was slightly below consensus forecasts of 3.1% and the lowest reading since April 2021. Food prices increased 0.1% for the month with an annual increase of 5.7%. Energy prices posted a 0.6% increase on the month, but with a 16.7% decline over the year. Core prices also increased 0.2% on the month with the year-on-year rate dipping to 4.8% from 5.3%, below expectations of 5.0% and the lowest reading since November 2021. After two months of strong price increases, there was a decline in used vehicle prices while the increase in shelter prices also moderated.
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13.30 Producer Price Index ex Food & Energy (YoY) (Jun) Exp.2.6% Prev. 2.8%