Market Report : 21.07.23

Published: 21/07/2023 By ECAP

Sterling bounced back this morning after data showed UK consumer spending was stronger than expected in June, in spite of high inflation, as wage growth picked up, supporting the case for more rate rises from the Bank of England this year. Nevertheless, traders have pared back their expectations for UK rates to rise to as much as 6% - rather than 6.5%.

The Euro stabilised this morning after having dropped 0.6% yesterday, as the dollar appreciated. The support comes as the European Central Bank is widely expected to raise interest rates by 25-basis points next week. Moreover, traders will be looking for guidance of future policy as a number of policymakers have recently sounded more dovish ahead of their blackout period.

The US dollar edged lower in early European hours this morning, consolidating after yesterday’s strong gains, with traders wary ahead of next week’s Federal Reserve meeting. On that note, the Fed is widely expected to lift interest rates by another 25-basis points next week. However, the central bank’s next move remains uncertain, and the odds of another hike nudged up after recent data.