US Dollar Awaits Key Data

Pound US Dollar exchange rate undermined by UK economic data

The Pound US Dollar exchange rate was on the back foot on Wednesday following the publication of some below forecast mid-tier UK data. At the time of writing GBP/USD was trading at around $1.2655, down roughly 0.2% from Wednesday’s opening rate. The Pound weakened against the majority of its peers on Wednesday following the publication of the Confederation of British Industry’s (CBI) latest distributive trades survey. The latest index came in well below forecast, and fell from a score of 8 to -24 rather than a more modest prediction of a reading of 1. With the index pointing to both a reduction in online shopping and in store purchases, this saw the Pound struggle to attract investor attention in the wake of the release.

Speaker: 10:30 - BOE Gov Bailey Speaks

The Euro remains unappealing ahead of French election

Yesterday EUR/USD could have tested the $1.0670 June lows before the US core PCE event. The pair traded as low as $1.0666 in yesterday’s trading, and in our view retains a general bearish bias for today’s session too.

The Euro remains unappealing before clarity on the French vote (mind that this may not come before the 7 July second round results), and speculative Yen selling is probably fuelling a broader USD rally. The next key levels are $1.0650 and $1.0600 for EUR/USD. Those may be reached on the back of some moves after the US debate overnight, although we expect a US core PCE at 0.1% month-on-month tomorrow to send EUR/USD into the weekend closer to $1.0700 than $1.0600.

No Major Data

USD: Biden-Trump debate tonight

The Dollar may stay generally supported today, unless Japanese FX intervention triggers an inversion – also consider caution ahead of the French vote on Sunday. We’ll be very interested to see if and how the Dollar reacts to tonight’s first TV debate between President Joe Biden and Donald Trump (02:00 BST). General consensus is that Trump is the most Dollar-positive candidate due to protectionism pledges, geopolitical stance and plans for lower taxes, but markets have not had a real chance to trade on the back of US political news as monetary policy dominated. Any FX action based on the perceived winner of the debate can help calibrate the coefficients for November’s market reaction function.

Data:?

13:30 - Final GDP q/q