GBP
The pound hit a 7 week high yesterday against the dollar  after an
unexpectedly strong inflation report boosted the currency. The Consumer
Prices Index (CPI) grew by 0.1% which is better than forecast and up
from 0.0% compared to June.

The core inflation measure increased to 1.2% from 0.8% which is higher than the
predicted 0.9%. This was due to a smaller fall in clothing prices as well as

GBP
The pound hit a 7 week high yesterday against the dollar  after an
unexpectedly strong inflation report boosted the currency. The Consumer
Prices Index (CPI) grew by 0.1% which is better than forecast and up
from 0.0% compared to June.

The core inflation measure increased to 1.2% from 0.8% which is higher than the
predicted 0.9%. This was due to a smaller fall in clothing prices as well as
falling prices for food and non-alcoholic beverages which partially offset the
rise. 

The higher inflation reading caused the pound to strengthen, this raised
expectations that the Bank of England would increase the likelihood that
interest rates would rise earlier that anticipated. External MCP member
Kirstin Forbes warned yesterday that keeping interest rates low for too long
risks undermining Britain’s economic recovery, especially if the increase was
rapid rather than the gradual path we expect.

EUR
A majority of German MPs are expected to vote in favour of the controversial
third Greek bailout later on today. Some MPs suspect that the deal could
lead to part of Greece’s debt to be written off – with EU taxpayers having to
foot the bill. Many MPs want assurances that the International Monetary Fund
will contribute to the bailout – but the IMF is avoiding any commitment until
Greece’s progress is assessed in October.

USD
New-home construction in the U.S. rose in July to the highest level in almost
eight years, indicating the industry will pick up in the second half of the
year. The Commerce Department report in Washington showed that residential
starts rose by 0.2% to 1.21 million from 1.2 million in the previous month, the
most since 2007. 

Rising employment and historically low mortgage rates are enticing buyers,
while increasing prices prompted by a lack of homes on the market is an incentive
to start new developments

Key Announcements:

09:30 – USD: Consumer Price
Index (YoY) expected to remain unchanged at 1.8%

18:00 – USD: FOMC Meeting minutes will be released.