Market Report : 18.07.23

Published: 18/07/2023 By ECAP

Sterling is holding on to its recent gains ahead of tomorrow’s key UK inflation data. On that note, inflation has remained stubbornly high boosting expectations of higher for longer UK rates.  Market participants are pricing rates rising above 6% from the current 5%. As a result, net speculative long GBP positions have hit the highest level since 2014.

The Euro made a fresh 17-month peak against the US Dollar this morning as the bullish run continues for the single currency. The move comes as market participants prepare for an easing in tomorrow’s Euro-wide CPI data. Moreover, the ECB will be meeting next week, and the interest rate market has a 25-basis point hike priced in – thus, further supporting the Euro.
The dollar struggled to recover yesterday after plunging to more than one year lows last week as the bears look set to tighten their grip on the greenback. The recent depreciation comes from growing bets for a less hawkish Fed, pushing the dollar index to the lowest level since April 2022, with Goldman Sachs anticipating that this downward trend could extend in the near term.