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USD added to Monday's gains following a surprise uptick in retails sales for the month of June. Gains were marginal however, and illustrates the negative sentiment markets currently have on USD based on the Fed’s dovish lean on rate policy.
*Daily move - against G10 rates at 7:30am, 17.07.24
** Indicative rates - interbank rates at 7:30am, 17.07.24
Data this morning revealed stronger than expected inflation in June, with prices in the service sector remaining stubbornly high. So, whilst headline inflation is now back at target, today's data challenges the idea of a rate cut in August, with odds now reduced to 36%. A September cut is now priced at 78%. GBP has been given a small boost following the numbers, as we wait to see what tomorrow’s job numbers will bring.
Final CPI numbers from Europe shouldn’t vary too much from the previous estimates, and thus we expect little movement on the EUR on this number. The rest of the day is expected to be quiet, and then in the evening we have the release of the Fed Beige Book, which may signal strains in the job’s markets which will likely add to dovish sentiment on rate policy, i.e. USD negative.
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