14/07 – Inflation everywhere

Jeremy Thomson-Cook
Jeremy Thomson-Cook 14 July 2021

GBP: Inflation rises and pulls the pound higher

EUR: Fed in focus today as inflationary pressures continue

USD: Broad euro weakness with COVID concerns across the Eurozone 

Sterling

UK CPI rises by 2.5% year on year in June against the expected 2.2% improvement helping the pound break higher against both the USD and EUR. With the current GBPEUR rate not seen since April in the short term and prior to that February 2020 before covid lockdowns.

Today we have two BOE members speaking, and again inflationary pressures will be watched closely.

Euro

Broad euro weakness has seen the euro fall through key supports against the US dollar and against the pound today. Coronavirus across the Eurozone has kept the single currency at bay with France commemorating Bastille Day today as the country faces a rise in Coronavirus cases mainly due to the new more contagious Delta variant.

Spain is seeing curfews as infection rates soar in young people and Germany is tackling a slowdown in vaccine take-up.

USD

US Inflation for June soars beyond expectation – headline inflation numbers at 5.4%, the highest number seen in 13 years whilst core inflation (excluding seasonal volatility e.g. change in food and energy prices) rises 4.5%. Analysts had anticipated a drop to the 4.9% level – this is the largest annual increase since August 2008 and inflation in the US has averaged over the last 6 months at 3.4%, well above the 2% target level.

This increased inflationary pressure is likely to further fuel talks of interest rate hikes by the Fed. As such, the focus will be on Fed Chair Jerome Powell, who will be speaking at the FOMC press conference this afternoon.

Market rates

Today’s Interbank Rates at 10:30 against sterling. Movement vs yesterday.

Euro €1.175 ↑
US dollar $1.384 ↓
Australian dollar $1.861 
South African rand R20.38 ↑
Japanese yen ¥153.0 ↑

Have a great day everyone.