Published: 13/07/2023 By ECAPSterling is trading near a new 15-month high against the Dollar even though this morning’s data showed that the UK economy contracted in May, raising the possibility of a recession later in the year. Yet, with UK inflation running at the highest rate of any major economy, the BoE is expected to continue its tightening cycle when it next meets.
The Euro rose to a fresh 15-month high against the Dollar, with French inflation confirmed at 4.5% in June on an annual basis, a drop from 5.1% the prior month. Looking forward, the ECB publishes the minutes from its June meeting later in the session. However, its officials have been pretty clear that another rate rise is coming this month, so the meeting’s account is unlikely to have much of an impact.
The US Dollar drifted lower this morning, continuing to fall after yesterday’s softer than expected US inflation data. This result raised expectations that the interest rate hike of 25-basis points priced into the Fed meeting later this month will be the last, potentially allowing the US economy to have a “soft landing”, boosting risk appetite to the detriment of the dollar.