UK inflation jumps to above 10.0%.

The German ZEW economic sentiment index dipped slightly further to -55.3 for August from -53.8 previously. This was slightly weaker than consensus forecasts and the lowest reading since 2008 while the current conditions index also edged lower to -47.6 from -25.8 in July.

US housing starts dipped to an annual rate of 1.45mn for July from a revised 1.60mn the previous month which was below consensus forecasts of 1.54mn and the lowest reading since September 2020.

Building permits edged lower to 1.67mn from 1.70mn, but beat market expectations. The data maintained reservations over the housing-sector outlook, although the permits data suggested underlying resilience.

Canadian consumer prices increased 0.1% for July with the year-on-year rate declining to 7.6% from 8.1% and in line with consensus forecasts.

The underlying rate edged lower to 6.1% from 6.2% while there was a net increase in the Bank of Canada core readings.

Japan’s Tankan manufacturing index strengthened to a 7-month high for August while the non-manufacturing index strengthened to the highest level for close to 3 years.

Japan’s export data was stronger than expected with record shipments to China and the US, although the trade deficit continued to widen due to the surge in energy imports with overall imports increasing 47% over the year.

The Reserve Bank of New Zealand (RBNZ) increased interest rates by a further 50 basis points to 3.00%, in line with consensus forecasts.

The RBNZ increased its projections for the outlook with the end 2022 rate increased to 3.69% from 3.41% previously and a peak at 4.1% from 3.95%.

UK consumer prices increased 0.6% for July with the year-on-year inflation rate jumping to 10.1% from 9.4%. This was above consensus forecasts of 9.8% and the highest rate for over 40 years. Core inflation also increased to 6.2% from 5.8%.

Producer output prices also increased 17.1% over the year from 16.4% previously.

Fears over the German and Euro-Zone economic outlook continued to sap underlying Euro support. European gas prices increased to a fresh record high on the day, maintaining concerns over the outlook. The US data releases had limited overall impact.

The Euro did rally from intra-day lows with a reluctance to chase the dollar higher. After hitting lows just below 1.0125, EUR/USD posted gains to 1.0195 before settling around 1.0180.

The yen remained generally vulnerable during the day. USD/JPY peaked near 134.70 before fading to near 1344.00 as US yields drifted lower.

The Swiss franc corrected weaker amid speculation over SNB smoothing operations. EUR/CHF recovered to 0.9665 with USD/CHF testing resistance above 0.9500 before trading just below this level.

Sterling rallied from intra-day lows with solid GBP/USD support on approach to 1.2000. GBP/USD jumped to 1.2140 after the inflation data before settling just above 1.2100. GBP/EUR drifted higher to around 1.1900.

Commodity currencies recovered from intra-day lows as the US dollar faded slightly. AUD/USD settled just above 0.7000 with slightly lower than expected wages data curbing support.

Canadian inflation was in line with expectations and oil prices declined, but the Canadian dollar rallied. USD/CAD retreated to just below 1.2850. The New Zealand dollar pared the initial surge after the RBNZ hike and NZD/USD traded around 0.6345.

Economic Calendar

07:00GBP Core CPI (Y/Y)(JUL)5.80%5.80%
07:00GBP CPI (Y/Y)(JUL)9.30%9.40%
07:00GBP CPI (M/M)(JUL)0.70%0.80%
07:00GBP PPI Input (Y/Y)(JUL)24%
07:00GBP PPI Input (M/M)(JUL)1.40%1.80%
07:00GBP PPI Output (Y/Y)(JUL)16.50%
10:00Euro-Zone GDP (Q/Q)0.20%0.70%
10:00Euro-Zone GDP (Y/Y)5.00%4.00%
13:30USD Core Retail Sales (M/M)(JUL)0.60%1.00%
13:30USD Retail Sales (M/M)(JUL)1.00%
15:00USD Business Inventories(JUN)1.40%
15:00Retail Inventories Ex. Auto (JUN)0.80%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.