Major currencies are keeping in narrower ranges for now as we see markets pause for a bit of a rethink, with the bond market saying one thing and that saw Wall Street checked back after an early rally in trading yesterday.
As things stand, a 50 bps rate hike by the Fed next month is all but assured but the question now is, will the door be shut for a 75 bps rate hike? Unfortunately, we may not get any certainty until we run it all back on the same set of data points in one month's time. The fact of the matter is, this is a market that is looking for clues from data points for more signals on inflation, the economic outlook, and how central banks intend to work with that to proceed with their tightening plans.
For now, bond yields are not breaking down and that is causing broader markets to be a little more guarded. Equities are holding up today but yesterday's price action suggests that investors may not want to get too greedy. In FX, the dollar remains sluggish but is not seeing a material decline just yet with key technical levels still hanging around.
Looking ahead, there won't be much on the agenda in Europe to shake things up with UK GDP figures for Q2 the highlight. It is expected that the UK economy declined by 1.3% in June with the Q2 estimate set to reflect a 0.2% decline in output. The BOE's recession call for next year may be a little late.
0600 GMT - UK June monthly GDP figures
0600 GMT - UK Q2 preliminary GDP figures
0645 GMT - France July final CPI figures
0700 GMT - Spain July final CPI figures
0900 GMT - Eurozone June industrial production
That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.
