Home Daily Commentaries Dollar holds gains after inflation data

Dollar holds gains after inflation data

Thursday 15 September, 2022

Daily Currency Update

GBP/USD is back under pressure after its brief rally earlier in the week. With US inflation coming in hotter than expected on Tuesday, the dollar gained across the board and has held onto most of this advance as we start Thursday. Domestically from the UK, it's a very quiet end to the week on the data front with next Thursday's interest rate decision from the Bank of England and new Chancellor of the Exchequer, Kwasi Kwarteng's mini-budget, which will likely come the day after the main events on the horizon. The Governor of the Bank of England, Andrew Bailey, will have welcomed yesterday's UK inflation figures, seeing an unexpected drop in CPI to 9.9% y/y. However, it remains way above target, and we should expect another 50bp hike from the BoE. It's hoped that Prime Minister Liz Truss' energy price cap plan will reign in inflation, however the sums that are being borrowed to pay for the plan are eye watering. However, deemed necessary to stave off inflation hitting levels last seen in the 1970s. GBP/USD remains around the 1.1525 level, with GBP/EUR also steady at 1.1550.

Key Movers

After Tuesday's US CPI number showing a higher than expected 8.3% y/y gain, global equities remain under pressure as markets mull the possibility that the US Federal Reserve may opt for a nuclear 100bp hike in interest rates to try to drive down rising prices. The consensus is that 75bp will be the preferred option from members of the Fed, however given that 100bp is even being considered, is causing a major headwind for global stocks with the dollar being the main beneficiary. Today's main event is US Retail Sales numbers due at lunchtime, with a small drop m/m predicted. European Commission President, Ursula von der Leyen, has outlined plans for a windfall tax on energy companies profits in an effort to reduce the soaring cost of household bills throughout the bloc. The Commission President hopes the plan will raise in excess of €140bn, however the finer details are yet to be solidified, with individual member states allowed some flexibility on how much they choose to levy. EUR/USD is back under parity at 0.9975.

Expected Ranges

  • GBP/USD: 1.1480 - 1.1600 ▲
  • GBP/EUR: 1.1490 - 1.1610 ▲
  • GBP/AUD: 1.6975 - 1.7140 ▼
  • EUR/USD: 0.9930 - 1.0100 ▼