Market eyes US inflation figure today.
Today we get the important US CPI inflation data with July with the headline forecast expected to see a fall from 9.1% to 8.7%, whilst the core rate expected to edge up from 5.9% to 6.1%. These figures will have a lot of attention across markets as it is a key bearing on weather the Fed hikes by 50bps or 75bps at its next meeting in September. Major currencies held steady on Wednesday with traders reluctant to place large bets ahead of U.S. inflation data, which markets will scrutinise closely for guidance on how steeply the U.S. Federal Reserve will raise interest rates in the coming months.
Currency wise the lack of top tier macro data or central bank newsflow meant their was little directional impact. Instead similar to Monday we saw the majors remained confined to tight ranges.
Sterling strengthened against a slightly weaker dollar on Tuesday, with the outlook for UK interest rates in focus after a Bank of England official flagged a further increase. BoE Deputy Governor Dave Ramsden told Reuters the bank will probably have to raise interest rates further from their current 14-year-high to tackle inflation pressures that are gaining a foothold in Britain’s economy.
GDP figures on Friday will provide the next key reading on the state of Britain’s economy. U.S. inflation data on Wednesday will also be watched closely in currency markets as investors assess whether another 75 bps rate hike from the Federal Reserve is likely in September.
European shares edged lower at the open on Wednesday on losses in technology stocks ahead of key inflation data from the United States. higher-than-expected U.S. Consumer Price Index report for July could spook markets, which are already expecting a high chance of a 75 basis point interest rate hike by the Federal Reserve next month.Rate-sensitive tech stocks shed 0.5%, to lead sectoral declines as euro zone money markets now fully price in a half-point interest rate hike by the European Central Bank in September.
Oil prices fell on Wednesday ahead of a key U.S. report on inflation and after industry data showed U.S. crude inventories unexpectedly rose last week, signalling a potential hiccup in demand. The Consumer Price Index report will be released at 12:30 on Wednesday. U.S. consumer prices are expected to have risen at a slower pace in July due to a sharp drop in the cost of gasoline, but that is not expected to stop the Federal Reserve from at least several more sharp interest rate hikes which could curb economic activity and fuel demand.
|06:00||EUR Harmonized Index of Consumer Prices (YoY)(JUL)||8.5%||8.5%|
|12:30||USD Consumer Price Index (MoM)(JUL)||0.2%||1.3%|
|12:30||USD Consumer Price Index (YoY)(JUL)||8.7%||9.1%|
|12:30||USD Consumer Price Index ex Food & Energy (MoM)(JUL)||0.5%||0.5%|
|12:30||USD Consumer Price Index ex Food & Energy (YoY)(JUL)||6.1%||5.9%|