| DAILY FOREX ANALYSIS BY CMC MARKETS |
Beige book puts dollar on back foot; Interest rate policy remains in focus
July 27th - Yesterday’s beige book report from the Fed had been keenly awaited by traders and whilst it arguably failed to provide a clear cut picture of the way ahead, consensus is undoubtedly that the cycle of rate hikes will soon be coming to an end. The dilemma however revolves around the fact that high energy prices are continuing to fuel inflationary pressures, but with signs of an economic slowdown emerging, if the hawkish attitude doesn’t abate soon then businesses risk being left somewhat exposed. As a result of this, cable has rallied back to levels not seen for almost two months and EUR/USD back to levels not seen since the earlier part of July although movement on both these pairs has doubtless been compounded by speculation that the respective central banks may see fit to add another quarter point in the near term. Notably next week’s ECB meeting would cause little surprise with a rate hike and after the UK CPI reading jumped back above the key 2% level earlier in the month, similarly a more aggressive stance over rates at the BoE is probably to be expected. There’s not too much fundamental data due for release today that may provide solid direction, although a jump in weekly jobless claims or a slowing of new home sales could leave the dollar under further pressure as a result.
Wayne Roworth and Enis Mehmet
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