Investors traded cautiously on Wednesday ahead of the release of the FOMC latest minutes. The Federal Reserve “signalled they had accelerated discussions on when to wind down it’s $120bn-a-month asset purchase programme”, revealing that a majority of US central bankers believe the withdrawal of the stimulus programme could start later this year. The US Dollar rallied following this release, making advances on Sterling and forcing EURUSD to a 9-month low by pushing it below 1.1700.
Poor UK inflation figures released yesterday morning proved to be a hindrance to Sterling. Inflation rose at an annual rate of 2% in July, slower than the 2.5% in June and 0.3% off official forecasts. The Office for National Statistics (ONS) attributed “almost half of the slowdown to “base effects” linked to rising prices in the corresponding period last July, when many services reopened after the first Covid-19 lockdown and clothing, restaurant, hotel and furniture prices rose”. Jonathan Athow, ONS Deputy National Statistician for Economic Statistics, said that “inflation fell back in July across a broad range of goods and services, including clothing, which decreased with summer sales returning after the pandemic hit the sector last year”.
GBPUSD opened the day trading at 1.3740 and made subtle gains as markets remained calm ahead of the FOMC latest minutes release at 19:00. Cable finally closed the session at 1.3757, before taking a sharp tumble after the close. Presently, GBPUSD trades just below the 1.3700 handle.
GBPEUR also managed to catch some upside yesterday. The pair started the session at 1.1728 and went on to close at 1.1741.
EURUSD remained subdued on Wednesday as it awaited the FOMC’s release for direction. The pair opened the day at 1.1715 and close just 4 pips below at 1.1711.