Home Daily Commentaries Markets eye key European inflation data due today

Markets eye key European inflation data due today

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Wednesday 24 July, 2024

Daily Currency Update

A European survey released yesterday supports the ECB's stance that economic risks are currently skewed to the downside. ECB Chief Economist Philip Lane reiterated the sentiments of other ECB council members, stating it is “simply too soon to give markets guidance on the likelihood of an interest rate cut this September.” He emphasized that council members are closely monitoring data and geopolitical risks to make an informed decision at the appropriate time.

The Pound fell today as recent economic data came in weaker than expected, increasing the likelihood of an interest rate cut by the Bank of England at its August policy meeting. Recent retail sales figures showed a decline of 0.2% compared to an expected rise of 0.2%. The Monetary Policy Committee (MPC) has indicated they will continue to monitor unfolding data and geopolitical events leading up to their August meeting.

Global stocks rose on Tuesday as US bond yields dipped in anticipation of a wealth of economic data and corporate earnings reports later this week. US existing home sales fell more than expected in June, dropping by 5.4% as house prices hit another record high. However, markets expect the housing market to rebound once the Federal Reserve begins cutting rates.

 

Key Movers

Europe sees the release of key inflation data later today, which will set the tone for the ECB's next policy meeting in September. Currently, markets are expecting two 25 basis point cuts before the end of the year. However, there are risks to this scenario, primarily stemming from geopolitical threats to the global supply chain. As a result, ECB officials are hesitant to provide forward guidance before their September meeting.

Britain's currency has been the best-performing against the US Dollar this year, as stickier-than-expected services inflation data has prompted the Bank of England to maintain higher interest rates for longer. This has kept yields on UK bonds at attractive levels, sustaining strong demand for the British Pound.

The US core personal consumption expenditures index (PCE), the Federal Reserve's preferred inflation measure, will be released this Friday. Meanwhile, Fed officials are maintaining their "data dependent stance," keeping markets on edge. Tentative signs of disinflation in the US have also increased market optimism for the first rate cut this year.

 

 

 

Expected Ranges

  • GBP/USD: 1.2855 - 1.2930 ▼
  • GBP/EUR: 1.1860 - 1.1905 ▼
  • GBP/AUD: 1.9520 - 1.9570 ▼
  • EUR/USD: 1.0820 - 1.0865 ▼

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.