Sterling continued to gain limited support from the stronger than expected June GDP data, although the overall impact was limited given expectations that the economy will remain fragile given the tightening in monetary policy and impact of higher interest rates. CFTC data recorded a small decline in long, non-commercial Sterling positions to 47,000 contracts in the latest week from just below 50,000 previously. The latest UK labour-market data will be released at Tuesday’s European open. The main focus is likely to be on the wages data given the importance for Bank of England expectations with pressure for further rate hikes if the data is stronger than expected. Weaker data would provide significant relief.
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The Euro was unable to hold a tentative move against the dollar and drifted lower amid fragile risk conditions and higher US yields. The single currency was unable to gain any fresh support and dipped into the US close. CFTC data recorded a decline in long Euro positions to a 4-week low just below 150,000 contracts in the latest week from 172,000 the previous week. The overall positioning will maintain the potential for a further paring of long positions. There were further reservations surrounding the Chinese economy on Monday which undermined the Euro as it edged lower.
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US producer prices increased 0.3% for July, slightly above consensus forecasts of 0.2% with the year-on-year increase at 0.8% from 0.2% previously. Underlying prices increased 0.3% with the annual increase holding at 2.4%. The University of Michigan consumer confidence index edged lower to 71.2 for August from 71.6 previously, but slightly above consensus forecasts of 71.0. There was a net uptick in the current conditions component, but this was offset by a dip in the expectations element. The 1-year inflation expectations index edged lower to 3.3% from 3.4% with the 5-year index at 2.9% from 3.0%.
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