Daily Market Report – 22/07/2014

Sterling fell slightly on Monday with a number of risk factors providing grounds for unease. Proceedings in the Ukraine and Gaza have driven investors to move out of the Pound and into more conventional safe haven currencies such as the Yen, Swiss Franc and Dollar.

To add to this concern there is a feeling that possibly the economic recovery in the UK has been a little exaggerated. Consumer confidence figures yesterday potentially support this having dipped for the first time this year  Asking prices for British houses also fell for the second time in 2014.

The market is pricing in a slight chance of interest rate rise in November but if The Bank of England minutes disappoint tomorrow and it suggests the MPC board members are willing to continue keeping interest rates on hold, then we could see more Sterling weakness

The concept of a Fed rate increase is also considered more important to the US currency market than the issues in the Gaza Strip and international distress over the downing of the Malaysian plane last week in Ukraine.

The benchmark year-on-year inflation rate is anticipated to remain at 2.1% from the previous month. With this being said, US price growth figures have tended to perform better than expected forecasts.

Should this occur today the potential for an upside movement in the dollar could be possible as it supports the thoughts that the duration between the end of the Federal Reserve’s quantitative easing programme and the first interest rate hike will be less than anticipated.

Key Announcements
13:30 - US: Consumer Price Index (YOY) June Expected to stay at 2.1%

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