Home Daily Commentaries Focus on US CPI data as EUR/USD could break parity

Focus on US CPI data as EUR/USD could break parity

Daily Currency Update

The pound slipped to a two-year low against the US dollar on Tuesday as political uncertainty weighed on the currency, however, the British pound did show signs of recovery in the afternoon as weakness in the USD provided GBP with some support.

Boris Johnson’s resignation as prime minister last week deepened the doubts hanging over the British economy. Its already under strain from inflation which is expected to hit double digits by October, the risk of a recession, and the impact of Brexit, which weigh heavy on the pound.

There is mounting pressure on the Bank of England to raise its interest rates to keep the impact of rising inflation at bay.  The BoE has raised interest rates five times since December as it tries to stop the surge in inflation from becoming embedded in Britain’s economy, and it is expected to increase them again at its August monetary policy meeting.

 

Key Movers

The euro continues to hover above parity with the US dollar, with traders wary of the single currency being forced to levels unseen for decades if US inflation data, due to be released later in the day, is better than expected. Economists forecast headline US inflation to have accelerated to 8.8% year-on-year in June, a 40-year high, which is likely to reinforce expectations of interest rate hikes which could help the US dollar.

The euro is down nearly 12% this year against the US dollar and fell to a 20-year low on Tuesday as the war in Ukraine has triggered an energy crisis that has hurt the continent’s growth outlook.

 

 

Expected Ranges

  • GBP/USD: 1.1825 - 1.1915 ▼
  • GBP/EUR: 1.1855 - 1.1935 ▲
  • EUR/USD: 0.9975 - 1.0055 ▼