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British pound down as rate hike hopes fade

British pound daily update


British pound daily update

Pound sterling is currently selling off against all major currencies except the euro. Yesterday, the pound ended the day slightly lower after weaker-than-expected inflation figures. Over the last two trading days, the move lower in the pound has been accompanied by significant trading volumes - a sign that bears are selling the currency with conviction. Today's GBP/USD trading range is 1.3010 - 1.3190. 

Looking at yesterday's economic data, both headline inflation and core inflation failed to match consensus expectations. More worryingly, core inflation for June slowed relative to the previous monthly figures. In  yesterday's daily update, we wrote that UK inflation is more likely to slow this year thanks to base effects and a rising currency. Now that inflation data is slowing in rate-of-change terms, traders are downgrading their expectations for an August rate hike. While the pound previously enjoyed some support from rate hike expectations in recent history, expected changes in monetary policy are more likely to weigh on the currency going forward. 

Later today, we'll see UK retail sales figures for June. After decelerating between 2016 and late 2017, recent consumption figures have been fairly strong. Given the importance of consumption in the broader UK economy, retail sales are highly correlated to changes in overall GDP growth. Our outlook on the currency remains bearish. 

GBP/USD is currently above 1.3020. EUR/GBP is up slightly, with the exchange rate above 0.8910. The pound is down slightly against the Australian dollar and down slightly against the Canadian dollar. GBP/AUD is currently above 1.7640, while GBP/CAD is above 1.7190. 

Date Event Actual Previous
July 17 Claimant Count Change JUN 7.8K -3K
July 17 Employment Change APR 137K 146K
July 17 Unemployment Rate MAY 4.2% 4.2%
July 17 Average Earnings excl. Bonus MAY 2.7% 2.8%
July 17 Average Earnings incl. Bonus MAY 2.5% 2.6%
July 18 Core Inflation Rate YoY JUN 1.9% 2.1%
July 18 Inflation Rate YoY JUN 2.4% 2.4%
July 18 Retail Price Index YoY JUN 3.4% 3.3%
July 18 PPI Input YoY JUN 10.2% 9.6%
July 18 PPI Output YoY JUN 3.1% 3.0%
July 19 Retail Sales YoY JUN 3.9%
July 19 Retail Sales ex Fuel YoY JUN 4.4%
July 20 Public Sector Net Borrowing JUN -£3.36B

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