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GBP Sinks on First Inflation Miss in Six Months

FOREX
  • GBP trades softer against all others in G10 following a broadly lower-than-expected June inflation report. Headline CPI slowed to 7.9% Y/Y, the slowest rate of inflation in a year, missing forecasts by 0.3ppts in the process. Core inflation was also soft, helping drive a step lower in GBP/USD from ~1.3020 to ~1.2925 at the NY crossover.
  • The Bank of England will be relieved to see pull lower in price pressures, however underlying strength in services prices could be limiting losses, with a 50bps rate hike in August yet to be ruled out. Market pricing is close to 50/50 for a 25 or 50bps move at present, a sharp retracement from the highs last week.
  • AUD/USD re-circling the earlier session lows in recent trade, with the move lower today erasing the entirety of the Jul13 rally. Next notable downside level crosses at 0.6746, the 20-day EMA, and a break below here would mark a notable downside shift in short-term momentum.
  • Commodities prices adding some modest downside pressure here, with industrial metals offered; Chinese-listed iron ore and CME-listed copper futures are both lower by 0.5% at typing. Move lower in spot today is prompting a drift in prices away from the more sizeable options expiries of the week, with $0.6800-15 seeing just over A$2bln notional roll off on Thursday.
  • US housing data are the highlights Wednesday, with housing starts and building permits on the docket. A speech from BoE's Ramsden is also due, who addresses quantitative tightening and will be gauged for a response to this morning's CPI release.
Energy BulletsCommoditiesUKBank Of England (BOE) Market News
Energy BulletsCommoditiesUKBank Of England (BOE) Market News

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