Domestic Pressure
GBP
The British Pound remains under pressure as concerns over the UK’s rising cost of living weigh on sentiment. A 4% increase in the energy price cap is expected to put further strain on household finances and could slow the economic recovery. Higher energy bills may also add to inflation, creating challenges for the Bank of England. With limited UK economic data ahead, political developments and wider market trends could influence the Pound.
EUR
The Euro is finding support as expectations grow that the European Central Bank could take further action to tackle inflation. Comments from ECB policymaker Isabel Schnabel have strengthened expectations of higher borrowing costs. A strong Eurozone economy and continued inflation concerns are also supporting the currency. Investors will now look to upcoming ECB meeting minutes for further clues about the bank’s future policy direction.
USD
The US Dollar is gaining support as signs of ongoing inflation increase expectations that the Federal Reserve could tighten policy later this year. Stronger than expected growth in US durable goods orders has also boosted confidence in the economy. Attention is now turning to the Fed’s annual Jackson Hole symposium, where investors will look for clues about the central bank’s future approach to interest rates.
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