GBP/USD fluctuates ahead of the release of key UK CPI inflation data | 17 July 2024

Event to pay attention to today:

09:00 GMT+3. GBP - Consumer Price Index

GBPUSD:

On Tuesday, the GBP/USD exchange rate fluctuated near recent highs as markets reassessed the likelihood of a Federal Reserve (Fed) rate cut. A decline in US retail sales has brought a recent string of US data to a close, indicating that price pressures have finally eased sufficiently for the Fed to move into a rate cut cycle in September.

US retail sales fell to 0.0% in June, in line with expectations and down from the previous month's revised 0.3% reading. The decline in US retail sales provides further encouragement to those markets that are anticipating a rate cut when the Federal Open Market Committee (FOMC) meets on 18 September.

The slowdown in retail sales growth reinforced the outlook for a rate cut in September, as signalled by last week’s Consumer Price Index (CPI) data. CME's FedWatch tool indicates that the probability of at least a quarter-point rate cut in September has reached nearly 100%. This suggests the possibility of up to three rate cuts in 2024.

Pound traders are approaching a series of key UK data releases in the second half of the trading week. The day's economic calendar will commence with the release of the latest UK CPI inflation data. In the near term, UK CPI inflation is forecast to decline to 0.1% m/m in June, down from the previous reading of 0.3%. Meanwhile, annualised CPI inflation is expected to remain at 2.0% y/y.

On Thursday, the UK will release updated employment data as part of its ongoing economic reporting. Analysts anticipate a decline in UK jobless claims in June, with the new reading expected to be 23.4K, down from the previous figure of 50.4K. On Friday, the UK will release retail sales data for June, which is forecast to show a decline of -0.4% from the previous reading of 2.9%.

Trading recommendation: We follow the level of 1.3000, when fixing above it we take Buy positions, when rebounding we take Sell positions.

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