FOMC hold inflationary concern

Daily Currency Update

UK inflation data showed a fall yesterday morning but missed the forecast figure. Sterling jumped against the USD and EUR on the news as the inflation figure remains 3 times over the target figure of 2%, increasing bets that the Bank of England may look to raise interest rates further to tackle long-term inflationary pressures. Following the release was Eurozone flash GDP where the second quarter came in at 0.3% and 0.6% year-on-year, matching expectations. Alongside this Eurozone industrial production was stronger-than-expected for June with month-on-month figures coming in at 0.5% versus the -0.1% forecast and monthly output rose 0.5% also. The news did little to support the EUR, with the bigger picture of uncertain economic growth and inflation. GBP/EUR has broken 1.1700 over the past couple of hours after steadily rising from 1.1640 yesterday. GBP/USD has traded at 1.2700 in the past 24 hours, touching 1.2760 at the highs.

There remain a few key releases ahead of the weekend with US unemployment claims tomorrow and UK retail sales early tomorrow morning. These will likely have a say on movement, but the essential data releases for the week have now passed and market participants will now start to position themselves ahead of next week.