Cable Touches Week High As Dollar Weakens

Sterling trades over $1.27 handle

The Pound outperformed yesterday against both the Dollar and Euro. GBP/EUR has gained half a cent in the last 24 hours and Cable broke the $1.27 handle on a falling US currency. Cable rose a hundred pips to $1.2747, the highest level since August 23rd, but later trimmed its gains. It is currently hovering around the 20-day SMA near $1.2720. Despite this week's bounce for the Pound, Sterling is set for a monthly drop against the Dollar in August.

Speaker: MPC Member Pill.

Euro bounces on inflation

The Euro hovered at $1.0922, after gaining 0.4% yesterday when higher-than-expected inflation numbers in Germany and Spain pointed to a hit Europe-wide reading. Traders have priced in an increased chance of a rate hike in Europe next month of about 50-50, and the Euro has made a new 15-year high of 159.76 per yen, though analysts think further gains would need substantial improvement in the economy. "If a weaker Dollar is only likely when the signs of slower growth are clear, a stronger Euro is only likely when the current gloom about the economy eases," said Societe Generale strategist Kit Juckes.

Data 10.00: CPI Flash estimate y/y expected 5.1% from 5.3% & Core CPI CPI Flash Estimate y/y expected 5.3% from 5.5%.

Dollar falls to two-week low as economic data softens

The Dollar dropped to a two-week low against the Euro and a basket of currencies yesterday and a week low versus the Pound after data showed that U.S. private payrolls rose less than expected in August, adding to expectations that the Federal Reserve would stop raising interest rates. Softening data this week has raised bets that the U.S. central bank has concluded its tightening cycle. It follows a brief increase in expectations for a November rate hike after relatively hawkish comments by Fed Chairman Jerome Powell on Friday. This Friday’s jobs report for August will be closely watched for further confirmation that the tightness in the labor market is ebbing as interest rates remain relatively high. “The Dollar’s falling on the belief that the Federal Reserve has done enough,” said Adam Button, chief currency analyst at ForexLive in Toronto. “I think nonfarm payrolls will be the final ‘stick the fork in it’ moment if it's soft.” Friday’s jobs data is expected to show that employers added 170,000 jobs in August, according to the median estimate of economists polled by Reuters.

Data 13.30: Unemployment Claims expected 236k from 230k & Core PCE Price Index m/m expected unchanged 0.2%.

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