The major move on the day came from GBP crosses, where far softer inflation at 2.5% vs 2.7% meant that markets began to rapidly unwind their expectation that the BOE would raise interest rates which saw considerable selling of GBP across the board. EURGBP now trades over 1.15% off the week’s lows and sits at resistance highlighted yesterday at .8720. GBPUSD is currently down 1.2% from the Tuesday highs, we did see a press below 1.4200 but that level appears to be holding for now, with 1.4175 now providing some light support. Retail sales headlines today’s calendar from the UK but for the pound Brexit is back on the radar following PM May’s defeat in the house of Lords meaning further debate and amendments will surely knock some of the positive Brexit sentiment we’ve seen in recent months.
The broader risk environment has been mixed, US stocks were weaker, but overnight bourses have remained in positive territory with Europe opening up mostly green this morning, Eurozone CPI was marginally weaker than expected and for ECB watchers that creates a concern, can the ECB come out even more dovish than their last meeting? Eurozone current account data is the pick of the European numbers but it’s unlikely to provide too much shirt in euro dynamics. EURUSD continues to look to press back above 1.2400 where the pair has regularly pulled back from.
The US Fed’s beige book was released yesterday and painted a picture of some modest wage growth, employment growth was also robust and the economy continues to grow at a modest pace. There are ongoing talks on trade, Trump’s currently in discussions with China but still no concrete headway appears to have been made. The USD gave back much of yesterday evenings gains, with the Fed’s trade tariff the cause of concern and a risk to US growth. Evans crosses the wires late this afternoon to add to the whole host of officials being rolled out by the Fed over the course of the week