DailyFX.com -

Talking Points:

  • British Pound Vulnerable with July BOE Meeting Minutes in the Spotlight
  • Australian Dollar Soars as 2Q CPI Data Inspires RBA Rate Hike Outlook
  • See Economic Data Releases on Your Charts with the DailyFX News App

Minutes from July’s Bank of England meeting headline the economic calendar in European hours. Monetary policy expectations remain firmly in control of price action. Indeed, the correlation between GBPUSD and the 2-year Gilt yield is now at 0.70, the highest in nearly three years (on 20-day percent change studies).

Commentary from Governor Mark Carney has offered mixed in recent weeks. The central bank chief said the markets were under-pricing the possibility of an interest rate hike this year, sending the British Pound sharply higher, only to walk back the comment days later. That has left Sterling adrift and waiting for direction cues.

With that in mind, traders will be keen to size up the voting pattern on the rate-setting MPC committee to see if unanimity in favor of the status quo was broken at July’s sit-down. While any votes in favor of a rate hike will have been in the minority, their emergence alone is likely to be interpreted as a de-facto hawkish posture shift and send the UK unit higher. Another 9-0 tally to keep things unchanged may yield the opposite result.

On balance, the case for a near-term tightening seems flimsy. UK economic news-flow has been deteriorating relative to expectations since late March. Meanwhile, June’s bounce in the baseline inflation rate (1.9 percent versus a 4.5-year low of 1.5 percent in May) masks a slide in price growth bets. Indeed, the 5-year “breakeven rate” – a measure of investors’ priced-in inflation outlook – has trended downward since April and now sits just above a four-month low. For the Pound, that seems to tilt surprise risk to the downside.

The Australian Dollar outperformed in overnight trade, rising as much as 0.4 percent on average against its leading counterparts. The rally followed the release of marginally upbeat second-quarter CPI figures. While the headline year-on-year inflation rate printed in line with expectations at 3 percent, the seasonally adjusted Trimmed Mean measure of “underlying” price growth trends topped forecasts to hit a four-year high of 2.9 percent. AUDUSD advanced alongside Australia’s 2-year bond yield, hinting the CPI data set inspired a hawkish shift in investors’ RBA policy outlook.

New to FX? START HERE!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

1:00

AUD

Skilled Vacancies (MoM) (JUN)

1.6%

-

1.8%

1:30

AUD

CPI (QoQ) (2Q)

0.5%

0.5%

0.6%

1:30

AUD

CPI (YoY) (2Q)

3.0%

3.0%

2.9%

1:30

AUD

RBA Trimmed Mean (QoQ) (2Q)

0.8%

0.6%

0.5%

1:30

AUD

RBA Trimmed Mean (YoY) (2Q)

2.9%

2.7%

2.6%

1:30

AUD

RBA Weighted Median (QoQ) (2Q)

0.6%

0.7%

0.6%

1:30

AUD

RBA Weighted Median (YoY) (2Q)

2.7%

2.7%

2.7%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

GBP

BBA Loans for House Purchase (JUN)

41375

41757

Low

8:30

GBP

Bank of England Minutes

-

-

High

10:00

GBP

CBI Reported Sales (JUL)

15

4

Low

11:45

GBP

BOE’s Carney Speaks in Glasgow

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3343

1.3414

1.3440

1.3485

1.3511

1.3556

1.3627

GBPUSD

1.6981

1.7022

1.7043

1.7063

1.7084

1.7104

1.7145

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
COMPANIES IN THIS ARTICLE
Trading Center