Good afternoon,

GBP made strong gains yesterday against the EUR, pushing above 1.1750 for the first time since 5th April 2020. Above expected inflation data out of the UK, showing a year on year growth of 2.5% in June, helped to prop up the pound over the course of the day. Analysts are expecting inflation to be as high as 3% come the end of the year. This buzz will likely prompt expectations for a Bank of England interest rate hike in 2022, which could provide further support for GBP towards the end of the year.

Soaring inflation in the US had led to a call for Central Bank intervention and a change in monetary policy. CPI data in June showed a 0.9% monthly growth in the price of all goods – for a staggering year on year growth of 5.4%. Fed Chair Powell cast USD to the bears today by rejecting conversation on the tapering of stimulus in the US. It is expected that Powell’s stance, centered around the lack of recovery in US labour markets, will need to be fully explained during his congressional testimony later this afternoon.  GBPUSD managed to climb as a result, falling just short of 1.39 throughout the afternoon of trading.

The calendar will see a very light data day across the board. UK unemployment data was released this morning slightly worse than expected at 4.8% vs a consensus of 4.7%. Investors and traders will take a keen interest in Powell’s speech later today, specifically for further rhetoric behind the Fed’s current decision and any inkling of a potential shift in stance.

Have a great day.

James Camp, Relationship Manager.

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