Gentium FX | Daily Report - 12th July 2023 - Pound Gains Against US Dollar

GBP: The Pound continues to perform well as the UK economy shows that it is coping in a high interest rate environment. ?Better than expected wage growth shows that the Bank of England will likely hike interest rates further. This has given further support to Sterling across the board pushing GBP/USD to a 15-month high. Bank of England Governor Bailey has reiterated this by suggesting that a strong UK labour market in theory should reduce stress placed on households from higher interest rates. It is clear that the central bank is likely to stay on a more hawkish path in the coming months.

EUR: Eurozone and German ZEW economic sentiment figures released yesterday came out worse than expected. Nonetheless, the Euro has made gains against a weaker Dollar but as struggled against a stronger Pound. ECB member Villeroy believes that European interest rates are close to reaching its peak level, which has kept the market from increasing demand for the common currency.

USD: US consumer price index inflation is due this afternoon and could prove to be the main driver for the day. Annual CPI is forecast to drop from 4.0% in May to 3.1% in June. If there is an unexpected reading of 4.0% or above, then the Dollar could see some further strength as this would push forecasts of future interest rate hikes by the Federal Reserve higher. On the other hand, a slightly softer than expected reading could lead to further Dollar weakness.?

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