German inflation remains sticky
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Daily Currency Update
The flash estimate of German inflation released yesterday indicates that inflation remains persistent across the entire Eurozone. In May, headline inflation was 2.4% year-on-year, up from 2.2% in April, but still lower than February's year-on-year rate of 2.5%. This persistence, or "stickiness," of inflation is expected to continue due to diminishing favorable energy base effects and a strengthening economy with rising wages.This situation has led to increased expectations that the European Central Bank (ECB) will cut interest rates by 25 basis points next week, with anything less likely causing a loss of credibility for the ECB's governing council members.
Following the inflation news, the Euro (EUR) lost value against the US Dollar (USD). The EUR/USD currency pair dropped below 1.0800 but has since rebounded above this level. The GBP/EUR pair saw an early spike to 1.1780 on Wednesday morning but has since decreased, reaching as low as 1.1745. The GBP/USD pair also softened, dropping below 1.2700 but has since recovered somewhat.
Key Movers
Today, the focus will be on the United States as key economic data is released, including GDP, employment, and housing data. At 1:30 PM, the preliminary quarter-on-quarter GDP update is expected, with a projected decrease from the previous quarter. At the same time, new unemployment claims are anticipated to increase slightly from last week's 215K to a forecasted 218K. Later, at 3:00 PM, the report on pending home sales is expected, with a forecasted decline of -1.1%, a significant drop from the previous month's 3.4%. These data releases will likely influence the value of the US dollar today and will be scrutinized for any indications of when the Federal Reserve might start cutting interest rates.Expected Ranges
- GBP/USD: 1.2660 - 1.2770 ▼
- GBP/EUR: 1.1720 - 1.1780 ▼
- GBP/AUD: 1.9180 - 1.9290 ▲
- EUR/USD: 1.0760 - 1.0860 ▼