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Dollar rises in light of PPI; Pound rises on wage data
The U.S. dollar advanced within a small range as traders awaited the July producer price index data, the first of the week’s inflation data, as a roadmap for future monetary policy decisions by the Federal Reserve.
The underlying figure, which does not take into account volatile components such as food and energy, would also rise by 0.2% on a monthly basis, down from 0.4% in June, with an annual increase of 2.7%, down from 3.0%.
According to analysts, they expect a consensus figure of 0.2% month-on-month in the core and underlying measures to ease market jitters about a round of CPI/PCE hikes that would deal a blow to risk sentiment just as global stock indices finish their recovery from recent losses.
On Wednesday, consumer price index data will be released, which is also expected to indicate a slight cooling of inflation in July.
Investors will be scrutinizing the data to determine whether the Fed will implement a 50 basis point or a 25 basis point cut at its September meeting, according to CME’s FedWatch tool, traders are evenly split between the two options.
At the end of last month, the Fed kept the policy rate in the same 5.25%-5.50% range where it has been for more than a year, although it indicated that a rate cut could be generated in September if inflation continues to cool.
Although this figure is a fall from the revised 5.8% last month, it is still above the estimated 4.6% growth and signals that the Bank of England will struggle if it wants to curb inflation completely.
Additionally, UK grocery inflation rose this for the first time, the increase not recorded since March last year, with market researcher Kantar reporting that annual grocery price inflation was 1.8% in the four weeks to August 4, up from 1.6% in the previous four-week period.
EUR/USD fell about 0.1% to 1.0922, with the euro losing slightly after consumer prices in Spain fell 0.5% in July, which appears to be a 2.8% annual rise.
The European Central Bank began cutting interest rates in June, and many expect policymakers to agree to another reduction in September, especially as inflation shows signs of dissipating.
Last week, the yen fell to near the 141 level on increased safe-haven demand and a reversal of carry trades, although doubts remain about the Bank of Japan’s room for further rate hikes in 2024.
The USD/CNY lost about 0.1% to 7.1704, with industrial production data along with retail sales expected later this week.
The U.S. dollar advanced within a small range as traders awaited the July producer price index data, the first of the week’s inflation data, as a roadmap for future monetary policy decisions by the Federal Reserve.
The dollar awaits PPI data
The producer price index, which measures changes in producer prices, is expected to rise 0.2% month-over-month in July, which would mean an anal increase of 2.3%, down from 2.6% last month.The underlying figure, which does not take into account volatile components such as food and energy, would also rise by 0.2% on a monthly basis, down from 0.4% in June, with an annual increase of 2.7%, down from 3.0%.
According to analysts, they expect a consensus figure of 0.2% month-on-month in the core and underlying measures to ease market jitters about a round of CPI/PCE hikes that would deal a blow to risk sentiment just as global stock indices finish their recovery from recent losses.
On Wednesday, consumer price index data will be released, which is also expected to indicate a slight cooling of inflation in July.
Investors will be scrutinizing the data to determine whether the Fed will implement a 50 basis point or a 25 basis point cut at its September meeting, according to CME’s FedWatch tool, traders are evenly split between the two options.
At the end of last month, the Fed kept the policy rate in the same 5.25%-5.50% range where it has been for more than a year, although it indicated that a rate cut could be generated in September if inflation continues to cool.
Pound rises on wage growth
Turning to Europe, GBP/USD rose 0.3% to 1.2801 following the release of data showing that UK wage growth excluding bonuses rose by around 5.4% in June.Although this figure is a fall from the revised 5.8% last month, it is still above the estimated 4.6% growth and signals that the Bank of England will struggle if it wants to curb inflation completely.
Additionally, UK grocery inflation rose this for the first time, the increase not recorded since March last year, with market researcher Kantar reporting that annual grocery price inflation was 1.8% in the four weeks to August 4, up from 1.6% in the previous four-week period.
EUR/USD fell about 0.1% to 1.0922, with the euro losing slightly after consumer prices in Spain fell 0.5% in July, which appears to be a 2.8% annual rise.
The European Central Bank began cutting interest rates in June, and many expect policymakers to agree to another reduction in September, especially as inflation shows signs of dissipating.
Yen loses ground
Turning to Asia, USD/JPY rose 0.4% to 147.81 with the yen losing ground on a Reuters report that the Japanese parliament is planning to hold a special session on August 23 to discuss the central bank’s decision last month to raise interest rates.Last week, the yen fell to near the 141 level on increased safe-haven demand and a reversal of carry trades, although doubts remain about the Bank of Japan’s room for further rate hikes in 2024.
The USD/CNY lost about 0.1% to 7.1704, with industrial production data along with retail sales expected later this week.