Gentium FX | Daily Report - 4th July 2022 - Market Awaits FOMC Meeting Minutes

The Pound remains under pressure as Tory rebels plan to coordinate another vote to oust PM Johnson later this month by changing current rules. To add to this, analysts believe that the UK's inflation has not yet peaked, and labour market uncertainty indicates that higher inflation expectations may already be expected. Looking ahead into the week, a lack of major data for the UK could keep the Pound trading in a tight range although any more negative headlines to do with inflation may exert some downward pressure.

Negative news regarding the German Trade Balance in May has had little impact on the Euro despite missing the $2.4B expected level – hitting a negative level of $-1B. The Ukraine war remains a large influence on the economy with energy becoming more of a concern. If a gas crisis occurs in the Eurozone, the ECB’s monetary policy may be impacted which could have a negative effect on the Euro. Eurozone Harmonised Index of Consumer Prices has boosted the odds of a rate hike by the ECB after reaching a higher level than expected on Fridays release.

The week ahead sees two major releases in the US economic calendar. The June Federal Open Market Committee minutes (Wednesday) will influence the markets direction ahead of a likely 0.75% rate hike at the end of this month. The US jobs report will be released on Friday and, in theory, should show employment gains which could strengthen the Dollar if expectations are met. That said, on the back of last Fridays US ISM Manufacturing PMI for June (which slumped to the lowest levels in two years, to 53.0 versus 54.9 expected), it is unlikely the greenback will show any major movements in either direction considering inflation remains high and prices continue to rise.