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GBP holds gains ahead of tomorrow's inflation numbers

Good morning


GBP has held recent gains against both USD and EUR, now trading at 1.2710 and 1.1705.  EURUSD is stuck around the 1.0870 area.  USDJPY broker higher, trading up from the 155.65 area to reach 156.55 overnight.  It is just off those highs now at 156.15 but with GBP strength and yen weakness GBPJPY is now 198.50 after failing just ahead of 199.00 a few times.  Will we be seeing 200 print, or will BoJ step in again to slow the yen depreciation?


This GBP support, which has taken GBPUSD to two month highs, has come despite BoEs Broadbent saying he can see a rate cut coming in the summer although he did add that BoE will be wary of cutting rates too soon.  Early tomorrow morning we will have the latest UK inflation data which of course is going to key when it comes to BoE decision making.  A much lower headline number is expected due to the lower Ofgem price cap on energy, some see it coming in as low as 2.1% from 3.2% last month, while the core is also expected to fall from 4.2% to 3.6%.  If we don’t see those declines we could well be looking at a higher GBP.


We had several Fed officials speaking yesterday, there was nothing really out of the blue, more just the normal ‘rate higher for longer, normal rates will be higher than previously, still fairly balanced risks on inflation, not ready to see sustainable lower inflation just yet.  They are happy to sit and wait.  US equities remain at or near record highs with many forecasting higher levels still to come in the major indices.  More Fed officials on the calendar today but I don’t expect any ground-breaking news to emerge from them.


RBA minutes overnight showed that a rate rise was discussed but the case for keeping them on hold was stronger.  There is a feeling though that inflation will likely stay high for longer, and RBA have certainly kept the potential for higher rates on the table.  However AUD has lost a little ground since the release with GBPAUD trading up to 1.9100 overnight, the highest level since early May.  Now 1.9070.


We will have the latest RBNZ rate announcement in the early hours of tomorrow morning.  They are expected to keep rates unchanged but I’m looking to see how hawkish they sound in the press conference.  Back in April they were certainly more hawkish than some expected although since then we have seen a lower RBNZ inflation expectation reading. 


That’s about all for now.  The UK inflation early tomorrow morning is the one to watch, today may be another fairly slow day in the markets.  This afternoon we will hear from Gareth Southgate as he names his provisional squad for the Euros.  I have made myself unavailable for selection. 


I hope you managed to get a bit of sun over the last few days.  It’s a bit miserable out and certainly cooler and the forecast suggests more of the same in the coming days.  It was good while it lasted. 


-  13.30 CAD CPI

-  14.00 Feds Waller speaks

-  14.05 Feds Williams speaks

-  15.45 Feds Barr speaks

-  18.00 BoEs Bailey speaks

-  00.00 Feds Bostic, Collins, Mester speak

-  00.50 Japan trade balance

-  03.00 RBNZ rate announcement

-  04.00 RBNZ press conference

-  07.00 UK CPI, RPI, PPI


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