Sterling tumbles to September lows after retail sales miss

Financial markets will be keeping one eye on any headlines out of Brussels today, with new Brexit Secretary Dominic Raab to hold talks with the EU’s chief Brexit negotiator for the first time. Earlier this morning, UK retail sales were the latest economic data release to fall short of expectations. Sales unexpectedly fell on a month previous by 0.5%, another sign that a BoE rate hike next month may not be a done deal.

Eurozone core inflation falls short again

We received another clear sign yesterday that a tightening of monetary policy in the Euro-area remains a long way off, after the rate of core inflation in the Eurozone undershot expectations once again.

The core rate of consumer price growth, which strips out volatile components of energy and food, was flat month-on-month in June, while growing by a worse-than-expected 0.9% on a year previous. As we reiterated previously, with core inflation still stuck stubbornly below the 1% level, we think that any interest rate hikes from the European Central Bank are very unlikely until deep into 2019 at the very earliest.

Powell maintains upbeat view on US economy

The greenback experienced another solid session yesterday, with the US Dollar index now trading just shy of its highest position in around a year.

Currency traders almost completely overlooked the latest housing data out of the US, which was almost entirely negative for the Dollar, in favour of comments from Fed Chair Powell. During his second day in front of Congress, Powell retained his bullish stand point, reiterating that the US economy was on course for more years of solid growth and playing down the risks of trade conflict.

Today looks set to be a relatively quiet trading session in the US, with jobless claims data and a speech by Philadelphia Fed member, Quarles, being the only events of note.