EUR/USD slips from 16-month high following underwhelming US data
Philip McHugh July 19th 2023 - 2 minute read
The US dollar reversed its initial losses on Tuesday as some disappointing US data undermined market risk appetite.
Meanwhile, the pound faces headwinds this morning, with GBP/EUR slumping to €1.1527 and GBP/USD plunging to $1.2948. GBP/CAD has retreated to CA$1.7060, while GBP/AUD slides to AU$1.9077 and GBP/NZD holds steady at NZ$2.0692.
Looking ahead, will the GBP selloff gather pace through today’s session as investors continue to digest the UK’s latest inflation figures?
What’s been happening?
The US dollar initially stumbled yesterday, with the currency falling in tandem with US Treasury yields.
US yields were pressured amid speculation an expected interest rate hike from the Federal Reserve next week may be the last of its current tightening cycle.
However, the US dollar rebounded later in the afternoon as some weaker-than-expected US data releases appeared to unnerve investors and bolster safe-haven demand.
The early weakness in USD saw the euro open Tuesday’s session on the front foot, with the EUR/USD exchange rate briefly striking a new 16-month high.
However, the absence of any Eurozone data of note ultimately left the euro unable to consolidate these gains.
Meanwhile, the pound traded sideways yesterday as GBP investors refrained from making any aggressive bets ahead of the publication of the UK’s latest inflation figures.
What’s coming up?
Today’s session was kicked off by the publication of the UK’s consumer price index.
June’s CPI figures reported a larger-than-expected drop in domestic inflation last month.
This has prompted markets to reprice expectations for the Bank of England’s (BoE) next interest rate decision, with the pound tumbling as GBP investors now expect the bank to pursue a 25bps hike in August.
The Eurozone will also publish its latest CPI figures later this morning. But barring a divergence between June’s preliminary and finalised figures, their impact on the euro could be negligible.
Finally, in the absence of any notable USD economic releases, any movement in the US dollar may be driven by market risk appetite. Could a cautious mood help to prop up demand for the ‘greenback’?
Written by
Philip McHugh