Dollar strength returns

Today's news headlines: 

‘UK output to hit pre-pandemic level a year earlier than forecast’. The CBI has become increasingly optimistic, predicting a return to pre-pandemic levels of growth by the end of 2021, almost a year earlier than was previously expected. A rise of 8.2% in GDP is expected this year before receding slightly in 2022 to growth levels of 6.1%. The CBI is expecting consumer spending to drive a majority of this growth with the help of government financial support that has been continuous throughout the pandemic. Inflation pressures are also thought to be transitory, and as suppliers catch up, supply and demand inconsistencies should begin to even out. (Financial Times) 

‘Dollar boosted by Fed’s shift in tone’. The Federal Reserve announced on Wednesday that the first interest rate rise would come sooner than expected in 2023. This has helped Dollar strength, with the Dollar Index jumping 0.87% on Thursday. This news comes as details around the US recovery emerged, showing a stronger-than-expected bounce back. In May, US CPI hit a year-on-year rate of 5%, which has grabbed the attention of central bankers. Talks of tapering the asset purchase programme are expected to take place next month. (Financial Times) 

Today's events, rates, and data 

  • UK markets finished yesterday lower after the Fed’s announcements with the FTSE 100 ending the day down 0.44% while the FTSE 250 closed 0.36% weaker. Cable has been forced lower thanks to the US dollar rally, with the pair now trading below $1.39. EUR/USD has faced similar pressure as the Euro holds support around $1.19. 

Today's events

Japan National Core CPI y/y: 0.1% vs -0.1% last month
German PPI m/m: 1.5% vs 0.8% last month
UK Retail Sales m/m: -1.4% vs 9.2% last month
UK Consumer Inflation Expectations: 9:30AM
Eurozone ECOFIN Meetings: All Day

Interbank rates

GBP/USD – 1.3878
GBP/EUR – 1.1666
EUR/USD – 1.1903
USD/CAD – 1.2375

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