IFX Market Report: Thursday 15th July 2021

The US Dollar weakened yesterday afternoon as Federal Reserve Chair Jerome Powell “stuck to the script on monetary policy” at his latest testimony. Confidence in the Fed’s view that the recent spike in inflation is “transitory” has withered, especially after Tuesday’s release of the US’ latest CPI data. CPI for June jumped 0.9% from the previous month and showed a year-over-year increase of 5.4%. Not only did these releases put the pressure on Powell to explain concisely his position during congressional hearings this week, but it also increased “the risk of a sharper split within the Fed on the next steps in setting monetary policy”. In fact, there are a few FOMC members who believe the US Central Bank should “quickly start reducing some of its support for the economy by trimming its $120B of monthly asset purchases in light of strong growth in US output and high inflation.” Powell has however suggested the Fed should act cautiously on the basis that the “labour marker remains far from a full recovery and inflationary pressures will eventually abate.”

As the S&P 500 hit another record high yesterday, Sterling was able to make subtle gains on a delicate Dollar. GBPUSD opened the session at 1.3831 and was able to go above the 1.3850 mark, closing the day at 1.3868.

GBPEUR once again experienced a flat session, void of any significant price action. The pair started the day at 1.1732 and closed 1 pip above at 1.1733.

Similarly to Cable, the Euro capitalized on a weaker Greenback. Starting the session at 1.1788, the pair was able to surpass the 1.18 handle, closing the session finally at 1.1819.

At 07:00 this morning, the UK’s Employment Change wildly missed expectations. Forecasted at 90K, the employment data that looks at the 3-month moving average, came in at a disappointing 25K. Adding insult to injury, the UK Unemployment Rate for May came out higher than expected at 4.8%. Later this morning the BoE will give their latest Credit Conditions Survey, and BoE member Michael Saunders will be speaking. Then in the afternoon, the US will be releasing its weekly Labour report, followed by June’s Industrial Production, and Powell’s final instalment of his testimony.

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