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US inflation data could dictate market mood

GBP - British Pound

GBP/USD traded within a narrow range yesterday, peaking at 1.3910. During the early UK session, we saw the pound lose some ground against the US dollar dropping to 1.3840. However, comments from FOMC member Williams, stating that the Fed have not yet achieved conditions to taper bond buying, as well as not giving an indication of when the Fed may reduce asset purchasing, improved risk appetite and we saw GBP/USD push back over 1.3900. With a relatively quiet data calendar within the UK today GBP/USD could be driven by the US inflation figures that are due today at 1.30pm.

Key Movers

Today’s US inflation figures are the major talking point. Stronger than forecasted readings could provide the dollar with some extra support. In June headline inflation figures are forecasted to decrease to 4.9% year-on-year, versus 5.0% from the previous month. And core inflation is expected to increase, 4.0% year-on-year from 3.8% in the previous month. If these inflation figures were to come in under their estimates however we could see the dollar weaken as it may give more leeway for the Federal Reserve to push back on the tapering of their bond buying scheme.

Recently, we have seen a general pattern that the euro is remaining relatively unchanged in the face of ECB headlines. Lagarde mentioned over the weekend that there may be some changes at the 22nd July policy meeting but the euro has remained stable. Like the UK, the data releases from the Eurozone are few today so some movement in EUR/USD could be from any unexpected US CPI figures. The pair is currently sat around the 1.1850 mark.

Expected Ranges

GBP/USD: 1.3750 – 1.3900 ▼

GBP/EUR: 1.1615 – 1.1725 ▲

GBP/AUD: 1.8470 – 1.8600 ▼

EUR/USD: 1.1785 – 1.1890 ▲