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Markets await US inflation data

Daily Currency Update

The US dollar is asserting its influence again although at a steadier pace in recent weeks, the dollar has been steadily gaining ground against the British Pound and even experiencing a slight resurgence versus the Euro.

While some economic indicators, like the Purchasing Managers’ Index (PMI), disappointed last week, the market’s attention swiftly shifted to the eagerly awaited non-farm payroll report on Friday. Although the job growth figure (187K) fell short of expectations, the USD was saved from embarrassment by the favourable unemployment rate, which printed at a commendable 3.5%.

The main news is the upcoming key inflation reading, the Consumer Price Index. The previous reading of 3% had generated a positive response from investors, and there is optimism that a push closer to the Federal Reserve’s 2% target will bolster the USD further.

Market participants are closely monitoring economic events, gauging their potential impact on the USD’s performance.

Key Movers

China’s consumer prices fall for the first time in 2 years, as fears of deflation grow, China reported a 0.3% drop in consumer prices in July from a year ago, and a 4.4% year-on-year drop in producer prices in July, according to the National Bureau of Statistics Wednesday.  Excluding food and energy prices, China’s core CPI rose by 0.8% from a year ago, the highest since January, according to official data accessed via Wind Information. Second-quarter data prompted several economists to warn of growing risk of deflation — a persistent decrease in prices over time.

The White House could detail its plans to prohibit some U.S. investments in sensitive technology in China, and may require that the government be notified of other investments. The plans are aimed at preventing U.S. capital and expertise from helping develop technologies that could support China’s military modernization and threaten U.S. national security. President Joe Biden is expected to soon issue a the long-awaited executive order to screen outbound investments in sensitive technologies to China this week.

Expected Ranges

  • GBP/USD: 1.27392 - 1.27821 ▼
  • GBP/EUR: 1.16452 - 1.15791 ▼
  • GBP/AUD: 1.94353 - 1.95151 ▲
  • EUR/USD: 1.09548 - 1.09828 ▼