Major currencies remain range-bound midweek, with the dollar index slipping a touch as EURUSD rallies a little after dropping yesterday. The pair failed to hold above the key 1.10 area yesterday, dropping to find support at 1.0950 and is currently treading water, seeking direction. With a lack of European data releases and summer holiday impacted liquidity woes, the pair continues to take its lead from the US, with tomorrow’s US CPI release eagerly anticipated.
The lack of European and US data has pushed China to the forefront, with data released overnight showing that both consumer and producer prices declined in July from a year ago. Markets believe that the bout of deflation may be temporary as PBoC policymakers face ongoing pressure to step up on both monetary and fiscal support. CPI dropped 0.3% last month from a year earlier, marking its first decline since February 2021 and producer prices fell for a tenth consecutive month. This is the first time since November 2020 that both consumer and producer prices registered a contraction.
The pound slipped a little yesterday, following EURUSD south as gilt yields fell following somewhat disappointing data from the British Retail Consortium which showed that like for like July retail sales rose less than in June. After starting the week on solid ground, GBPUSD fell below 1.2750 before recovering slightly as we await the key US data in the coming days.