Nevertheless, housing supply trends may influence the Fed rate path. Tight inventories have pushed house prices higher. Affordability issues have driven demand for rentals. Higher rents contribute to housing services and headline inflation.

A pullback in rents through increased housing supply may ease housing services inflation and support multiple 2024 Fed rate cuts. A more dovish Fed could impact buyer demand for the USD/JPY.

Interest Rates and Housing Starts

Peachtree Creek Investments founder Conor Sen recently commented on Q2 housing start numbers, stating,

“In Q2, multi-family housing starts were at their lowest level since Q1 2011, and a dozen of the US’s 50 largest metros saw zero new multi-family starts.”

He also affirmed that the interest rate environment impacted housing starts.

While housing sector data needs consideration, investors should track FOMC Member speeches.

FOMC Member Speakers

FOMC voting Members Thomas Barkin and Christopher Waller are on the calendar to deliver speeches. Their reactions to recent inflation numbers, retail sales figures, and views on the timing of a Fed rate cut could move the dial.

Short-term Forecast: Bearish

USD/JPY trends depend on US labor market data (Thurs) and inflation numbers from Japan (Fri). Weaker US labor market conditions could raise expectations of multiple 2024 Fed rate cuts. Conversely, higher inflation figures from Japan could greenlight a July BoJ rate hike. The BoJ could also cut JGB purchases more aggressively.

Narrower interest rate differentials could support a USD/JPY drop toward 150.

Investors should remain alert as crucial economic indicators loom. Monitor real-time data, central bank commentary, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY return to 160 would support a move to the July 3 high of 161.951.

Intervention warnings, economic data, and central bank commentary require consideration.

Conversely, a drop below the 50-day EMA could give the bears a run at the 155 handle.

The 14-day RSI at 44.55 suggests a USD/JPY drop to 155 before entering oversold territory.

• EUR/USD alternated gains with losses around 1.0900.
• The US Dollar ended Tuesday’s session barely changed.
• The Economic Sentiment in Germany worsened in July.

The US Dollar (USD) regained some balance after stronger-than-expected Retail Sales, although that initial upside impetus ran out of steam as the NA session drew to a close on Tuesday.

Against that backdrop, the USD Index hovered around the low-104.00s, while EUR/USD managed to regain composure and reclaimed the 1.0900 neighbourhood following an earlier drop to the area below that round level.

The inconclusive price action around spot came amidst further demand for the fixed-income space on both sides of the ocean, resulting in the acceleration of the downtrend in US and German yields across various timeframes.

Meanwhile, the macroeconomic landscape remained stable. Investors generally expect the European Central Bank (ECB) to keep its policy rate unchanged at its July 18 meeting, though markets still anticipate two additional cuts by the end of the year.

Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

Furthermore, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

The ECB’s rate cut in June, coupled with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term.

However, economic recovery prospects in the Eurozone, along with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future, a view that appears to have regained poise on the back of rising expectations of rate cuts by the Fed.

Looking ahead, upcoming US data coupled with Fedspeak and the ECB event should remain the key drivers of the pair’s price action in the short-term horizon at least.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to meet the next upward hurdle at 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears seize control, spot may touch the 200-day SMA of 1.0806 before sliding to the June low of 1.0666 (June 26). From here, the loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, it looks that more gains are in the works if the crucial 200-day SMA is continuously breached.

So far, the 4-hour chart indicates that some consolidative fashion might have kicked in. The initial resistance level is 1.0922, which comes ahead of 1.0981. On the other hand, the 55-SMA at 1.0847 comes first, followed by the 200-SMA at 1.0788, and lastly 1.0709. The RSI (relative strength index) rose to around 60.

• EUR/USD alternated gains with losses around 1.0900.
• The US Dollar ended Tuesday’s session barely changed.
• The Economic Sentiment in Germany worsened in July.

The US Dollar (USD) regained some balance after stronger-than-expected Retail Sales, although that initial upside impetus ran out of steam as the NA session drew to a close on Tuesday.

Against that backdrop, the USD Index hovered around the low-104.00s, while EUR/USD managed to regain composure and reclaimed the 1.0900 neighbourhood following an earlier drop to the area below that round level.

The inconclusive price action around spot came amidst further demand for the fixed-income space on both sides of the ocean, resulting in the acceleration of the downtrend in US and German yields across various timeframes.

Meanwhile, the macroeconomic landscape remained stable. Investors generally expect the European Central Bank (ECB) to keep its policy rate unchanged at its July 18 meeting, though markets still anticipate two additional cuts by the end of the year.

Conversely, there is ongoing debate among investors about whether the Fed will implement one, two, or three rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

Furthermore, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

The ECB’s rate cut in June, coupled with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term.

However, economic recovery prospects in the Eurozone, along with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future, a view that appears to have regained poise on the back of rising expectations of rate cuts by the Fed.

Looking ahead, upcoming US data coupled with Fedspeak and the ECB event should remain the key drivers of the pair’s price action in the short-term horizon at least.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is expected to meet the next upward hurdle at 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears seize control, spot may touch the 200-day SMA of 1.0806 before sliding to the June low of 1.0666 (June 26). From here, the loss of the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the broader picture, it looks that more gains are in the works if the crucial 200-day SMA is continuously breached.

So far, the 4-hour chart indicates that some consolidative fashion might have kicked in. The initial resistance level is 1.0922, which comes ahead of 1.0981. On the other hand, the 55-SMA at 1.0847 comes first, followed by the 200-SMA at 1.0788, and lastly 1.0709. The RSI (relative strength index) rose to around 60.

• At the beginning of this week’s trading, the USD/JPY exchange rate settled around 158.00, stabilizing amid strong selling pressure it faced since last week, which caused it to plummet from the resistance level of 161.90, the lowest price for the yen in 38 years, extending losses to the support level of 157.37.
• Thus, the USD/JPY is expected to remain on its current downward trajectory pending the reaction to the announcement of US inflation figures. 

According to reputable trading platforms, the Japanese yen stabilized at 158 yen per dollar in light trading, with traders remaining on high alert after the currency rose about 2% last week due to suspected intervention by Japanese authorities. Last week, the yen rose to 157.36 yen per dollar following lower-than-expected US inflation figures and Bank of Japan data indicating that the government may have spent up to 3.57 trillion yen on Thursday to support its currency. Analysts warned that Monday’s holiday might lead to another round of yen buying by Japanese authorities to take advantage of weak liquidity, like what they did in late April. 

On the monetary policy front, investors are looking ahead to the Bank of Japan’s policy meeting in late July where it is expected to announce plans to scale back bond purchases and possibly raise interest rates again. Externally, the yen has been pressured by a stronger dollar that has benefited from safe-haven bids after the assassination attempt on former U.S. President Trump. 

Regarding stock trading platforms, US stock futures rose on Monday, with S&P 500 futures up 0.5%, the Dow Jones up 230 points, and the Nasdaq up 0.5%. This performance came as traders digested the assassination attempt on Donald Trump, which allegedly increased his chances of winning the US presidential election. 

According to trading, shares of the Trump media and technology conglomerate jumped more than 48% in pre-market trading. Meanwhile, earnings season is in full swing this week, with Goldman Sachs adding nearly 0.7% before the opening bell after beating earnings and revenue. Also, BlackRock rose 1.1% after reporting an 11% increase in second-quarter earnings. Among the major companies, Apple (2%), Nvidia (1.3%) and Amazon (0.1%) were in the green, while Tesla rose more than 3%. In contrast, Microsoft stock fell (-0.2%) while Meta and Alphabet traded around the flat line. 

USD/JPY Technical analysis and Expectations Today 

Based on the performance on the daily chart attached, USD/JPY trading pair is still on its downward path. Technically, breaking the support of 158.00 will increase the bears’ control over the trend and will confirm the bearish shift over that period if the currency pair moves towards the support levels of 155.70 and 153.00 respectively. Decisively, this requires Japanese intervention in the forex market in addition to the continued weakness of the dollar price following the announcement of lower-than-expected US retail sales this week. In contrast, and over the same period, the psychological resistance of 160.00 will remain the most important for the bulls to regain control over the trend. 

Ready to trade our daily forex forecast? Here are the best forex brokers in Japan to choose from. 

Important DisclaimersThe content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party’s services, and does not assume responsibility for your use of any such third party’s website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.Risk DisclaimersThis website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.

• GBP/USD fluctuates above 1.2950 after posting small losses on Monday.
• Inflation data from the UK on Wednesday could trigger the next big action in the pair.
• US Retail Sales in June are expected to remain unchanged.

GBP/USD lost its traction after coming in within a touching distance of 1.3000 on Monday and closed the day modestly lower. The pair holds steady slightly above 1.2950 in the European session on Tuesday.

The cautious market mood helped the US Dollar (USD) find a foothold at the beginning of the week, causing GBP/USD to correct lower from the highest level it touched in nearly a year.

During the American trading hours, Federal Reserve (Fed) Chairman Jerome Powell said that inflation readings in the second quarter represented further progress but repeated that he is not going to send any signals on any particular meeting. With markets already fully pricing in a Fed rate cut in September, according to the CME FedWatch Tool, these comments had little to no impact on the USD’s performance against its rivals. 

The US Census Bureau will release Retail Sales data for June later in the day. Markets expect a no change following the marginal 0.1% increase recorded in May. Although a positive surprise could support the USD, investors are unlikely to take large positions, or change their minds about the Fed rate outlook, based on this data alone. Hence, the market reaction could remain short-lived.

On Wednesday, the UK’s Office for National Statistics will publish Consumer Price Index (CPI) figures for June, which could influence the market expectations regarding the timing of the Bank of England’s (BoE) rate reduction. Ahead of this data, GBP/USD’s action could remain subdued.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2950 (20-period Simple Moving Average (SMA), static level). If the pair falls below that level and fails to reclaim it, 1.2900 (psychological level, static level) could be seen as next support before 1.2850 (mid-point of the ascending regression channel coming from late April).

On the upside, 1.3000 (upper limit of the ascending channel, psychological level) aligns as strong resistance ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

• GBP/USD fluctuates above 1.2950 after posting small losses on Monday.
• Inflation data from the UK on Wednesday could trigger the next big action in the pair.
• US Retail Sales in June are expected to remain unchanged.

GBP/USD lost its traction after coming in within a touching distance of 1.3000 on Monday and closed the day modestly lower. The pair holds steady slightly above 1.2950 in the European session on Tuesday.

The cautious market mood helped the US Dollar (USD) find a foothold at the beginning of the week, causing GBP/USD to correct lower from the highest level it touched in nearly a year.

During the American trading hours, Federal Reserve (Fed) Chairman Jerome Powell said that inflation readings in the second quarter represented further progress but repeated that he is not going to send any signals on any particular meeting. With markets already fully pricing in a Fed rate cut in September, according to the CME FedWatch Tool, these comments had little to no impact on the USD’s performance against its rivals. 

The US Census Bureau will release Retail Sales data for June later in the day. Markets expect a no change following the marginal 0.1% increase recorded in May. Although a positive surprise could support the USD, investors are unlikely to take large positions, or change their minds about the Fed rate outlook, based on this data alone. Hence, the market reaction could remain short-lived.

On Wednesday, the UK’s Office for National Statistics will publish Consumer Price Index (CPI) figures for June, which could influence the market expectations regarding the timing of the Bank of England’s (BoE) rate reduction. Ahead of this data, GBP/USD’s action could remain subdued.

GBP/USD Technical Analysis

GBP/USD was last seen trading slightly above 1.2950 (20-period Simple Moving Average (SMA), static level). If the pair falls below that level and fails to reclaim it, 1.2900 (psychological level, static level) could be seen as next support before 1.2850 (mid-point of the ascending regression channel coming from late April).

On the upside, 1.3000 (upper limit of the ascending channel, psychological level) aligns as strong resistance ahead of 1.3040 (static level from July 2023) and 1.3100 (psychological level, static level).

The Dollar Index (DXY) is currently trading at $104.328, up 0.07%. On the 4-hour chart, the pivot point is $104.238. Immediate resistance levels are $104.432, $104.530, and $104.663.

Support levels are $104.050, $103.909, and $103.782. The 50-day EMA stands at $104.472, while the 200-day EMA is $104.998. A bullish outlook is maintained above the pivot point of $104.238, with potential upward movement toward the resistance levels.

Conversely, a break below $104.238 could initiate a significant selling trend.

EUR/USD Technical Forecast

The EUR/USD is trading at $1.08922, down 0.02%. The 4-hour chart shows a pivot point at $1.08968. Immediate resistance levels are $1.09114, $1.09274, and $1.09431. Support levels are at $1.08807, $1.08623, and $1.08443.

The 50-day EMA is $1.08736, and the 200-day EMA is $1.08121. A bearish outlook prevails below the pivot point of $1.08968, suggesting further declines if the level is breached.

Conversely, a break above this pivot point could shift sentiment towards a bullish bias.

GBP/USD Technical Forecast

Is the US economy heading for a recession?

Bloomberg TV Asia Pacific Chief Markets Editor David Ingles recently commented on the US economy. He said,

“Alas, looks like the US economy is cooling quicker than most analysts think. The Bloomberg US Economic Surprise Index has dropped to a 9-year low.”

Short-term Forecast: Bearish

USD/JPY trends depend on US retail sales and central bank commentary. Lower-than-expected US retail sales could signal September and December Fed rate cuts. Bank of Japan support for a July rate hike and cut to JGB purchases would also narrow interest rate differentials.

Investors should remain alert as the US retail sales loom. Monitor real-time data, central bank commentary, and expert commentary to adjust your trading strategies accordingly. Stay updated with our latest news and analysis to manage USD/JPY volatility.

USD/JPY Price Action

Daily Chart

The USD/JPY sat above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY breakout from 158.500 would support a move toward 160. A return to 160 could give the bulls a run at the July 3 high of 161.951.

Central bank commentary and US retail sales require consideration.

Conversely, a break below the 50-day EMA could signal a drop toward the 155 handle.

The 14-day RSI at 42.82 indicates a USD/JPY drop to 155 before entering oversold territory.

• EUR/USD met some selling pressure around 1.0920.
• The US Dollar showed some signs of life on Monday.
• Next on tap are US Retail Sales, and the ECB event.

The US Dollar (USD) regained some composure in a mildly optimistic start to the week, pushing the USD Index (DXY) to the low-104.00s against the backdrop of a generalized knee-jerk in the risk-linked universe.

The modest advance in the Greenback dragged EUR/USD back below 1.0900 soon after spot hit new monthly peaks around 1.0920, all amidst marginal moves in the US and German money markets.

In the meantime, there was no news from Chief Powell, after he argued that he does not anticipate major economic turbulence or recession in the US economy, stating that a hard landing scenario is not the most likely. He also noted that progress is being made towards bringing price increases back to the Fed’s target.

Meanwhile, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

Meanwhile, the macroeconomic landscape remained stable on both sides of the Atlantic. Consensus among investors expects the European Central Bank (ECB) to maintain its policy rate unchanged at its July 18 gathering, although markets continued to see two additional cuts by year-end.

On the other hand, investors continue to debate whether the Fed will implement one or two (or three) rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

The ECB’s rate cut in June, along with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term. However, economic recovery prospects in the Eurozone, combined with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, US Retail Sales could shed extra light on the Fed’s plans to reduce its interest rates, while the Economic Sentiment in Germany and the euro area are expected to take centre stage on the domestic calendar on Tuesday.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is likely to reach the next upward hurdle at the July top of 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears gain control, spot might approach the 200-day SMA at 1.0805 before falling to a low of 1.0666 on June 26. From here, the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, it appears that further gains are on the way if the key 200-day SMA is consistently surpassed.

So far, the 4-hour chart shows an increase in the positive momentum. The initial resistance level is 1.0922, ahead of 1.0981. On the flip side, the 55-SMA at 1.0832 is first, followed by the 200-SMA at 1.0786 and, finally, 1.0709. The relative strength index (RSI) has fallen below 66.

• EUR/USD met some selling pressure around 1.0920.
• The US Dollar showed some signs of life on Monday.
• Next on tap are US Retail Sales, and the ECB event.

The US Dollar (USD) regained some composure in a mildly optimistic start to the week, pushing the USD Index (DXY) to the low-104.00s against the backdrop of a generalized knee-jerk in the risk-linked universe.

The modest advance in the Greenback dragged EUR/USD back below 1.0900 soon after spot hit new monthly peaks around 1.0920, all amidst marginal moves in the US and German money markets.

In the meantime, there was no news from Chief Powell, after he argued that he does not anticipate major economic turbulence or recession in the US economy, stating that a hard landing scenario is not the most likely. He also noted that progress is being made towards bringing price increases back to the Fed’s target.

Meanwhile, the CME Group’s FedWatch Tool fully priced in lower rates at the September 18 meeting.

Meanwhile, the macroeconomic landscape remained stable on both sides of the Atlantic. Consensus among investors expects the European Central Bank (ECB) to maintain its policy rate unchanged at its July 18 gathering, although markets continued to see two additional cuts by year-end.

On the other hand, investors continue to debate whether the Fed will implement one or two (or three) rate cuts this year, despite the Fed’s current projection of a single cut, likely in December.

The ECB’s rate cut in June, along with the Fed’s decision to maintain rates, has widened the policy divergence between the two central banks, potentially leading to further weakening of EUR/USD in the short term. However, economic recovery prospects in the Eurozone, combined with signs of cooling in key US economic indicators, may mitigate this disparity and occasionally support the pair in the near future.

Looking ahead, US Retail Sales could shed extra light on the Fed’s plans to reduce its interest rates, while the Economic Sentiment in Germany and the euro area are expected to take centre stage on the domestic calendar on Tuesday.

EUR/USD daily chart

EUR/USD short-term technical outlook

EUR/USD is likely to reach the next upward hurdle at the July top of 1.0922 (July 15), followed by the March peak of 1.0981 (March 8) and the psychological 1.1000 barrier.

If bears gain control, spot might approach the 200-day SMA at 1.0805 before falling to a low of 1.0666 on June 26. From here, the May low of 1.0649 (May 1) leads to the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, it appears that further gains are on the way if the key 200-day SMA is consistently surpassed.

So far, the 4-hour chart shows an increase in the positive momentum. The initial resistance level is 1.0922, ahead of 1.0981. On the flip side, the 55-SMA at 1.0832 is first, followed by the 200-SMA at 1.0786 and, finally, 1.0709. The relative strength index (RSI) has fallen below 66.

U.S. retail sales are in focus this week. Image © Adobe Images

Pound Sterling has risen to its highest level in a year against the Dollar after last week’s 1.35% gain. But, the rally leaves it technically overbought in the near term and exposed to weakness if this week’s inflation and wage figures undershoot expectations.

The Pound to Dollar exchange rate hit a high of 1.2990 on Friday and holds onto these gains as Monday brings about a busy week for the British currency.

The pair quotes at 1.2976 at the time of writing, which means the most competitive payment rates on offer are now near 1.2914. The odds of a pullback are high, with the daily RSI now reading at 72.98.

Above: GBP/USD at daily intervals with the RSI in the lower panel. Track GBP/USD with your custom alerts; find out more here.

A reading above 70 is consistent with overbought signals. The RSI rarely stays above 70 or below 30 as it tends to revert towards 50. To achieve this, a period of consolidation or weakness must ensue.

Any weakness in the coming days could be restricted to the previous 2024 cycle highs at 1.2893 and 1.2860, respectively.

Weakness is seen as temporary at this juncture as Pound-Dollar trades well above its key moving averages, which confirms the exchange rate is in an uptrend that can continue to extend once a period of consolidation has taken place.

“The cable has surged above its bearish trend line that has persisted since June 2021, hinting at a possible significant upward movement,” says Fawad Razaqzada, an analyst at City Index.

Pound Sterling outperformance means it stands at the top of the G10 currency basket for 2024 thanks to a trifecta of developments: 1) improving domestic data, 2) a retreat in Bank of England rate cut expectations and, 3) improved political sentiment.

“The GBP currently has the strongest upward momentum amongst G10 currencies. The UK election result has created a more favourable backdrop for the GBP. The large majority for Labour should ensure a period of much-needed political stability in the UK,” says Lee Hardman, an analyst at MUFG Bank Ltd.

The key tests for the Pound come from this week’s inflation and wage figures. Services inflation is expected to read at 5.6% and headline CPI inflation is forecast to read at 2.0%. Any undershoot would raise the odds of an August 01 rate cut and send an overbought Pound-Dollar sharply lower.

Analysts at Oxford Economics reckon the headline CPI inflation print will be 1.8%, which would represent a decent undershoot and prompt a selloff in the Pound.

“Considering the GBP has been the best performing G-10 currency QTD, we think it remains prone to a larger correction if CPI print comes in lower than expectations,” says Daragh Maher, Head of FX Strategy at HSBC.

However, the sell-off in the Pound would be limited because the Bank of England will find it difficult to cut aggressively if the economy continues to perform robustly, something several economists said was likely following last week’s GDP release.

Regarding the wage numbers on Thursday, the expectation is for average weekly earnings to have increased by 5.8% over the year to June. Anything below here would result in GBP selling.

Pound-Dollar’s performance nevertheless reflects Dollar weakness more than anything. We note that the dollar has come under pressure over recent days as investors settle on a high likelihood that the Federal Reserve will cut interest rates for the first time in September.

Confidence was boosted by last week’s undershoot in U.S. CPI inflation data. Pound-Dollar smashed through the 1.29 barrier to quote at a new 2024 high of 1.2935 after U.S. CPI inflation printed -0.1% month-on-month in June, down from 0% in May and below expectations for a 0.1% rise.

“Turbo-charging the pound’s recent uplift was data showing US inflation cooled last month, boosting bets of more Fed rate cuts this year and next,” says George Vessey, Lead FX Strategist at Convera.

Money market pricing shows the odds of a September interest rate cut at the Fed are now priced as a near certainty after the headline inflation rate fell to 3.0% year-on-year from 3.3%, undershooting expectations for 3.1%.

Tuesday’s retail sales will be the U.S. data highlight of the coming days, shedding light on demand in the economy. The market’s expectation of an undershoot of the 0% m/m figure could result in further USD weakness as the Fed would become increasingly confident that the disinflation process was underway again.