Sterling Pushes Higher; CPI Is Next

UK labor market data improved; MPC meeting minutes show unanimous voting; Gold consolidation to continue; German bund yield hits 1.51%. Focus turns to CPI, Empire state manufacturing; TIC data, capacity utilization and industrial production.

With many European markets closed in observance of Assumption Day, the currency market trades in narrow ranges. The exception is EUR that trades weaker across the board. EURUSD fell from 1.2330s to 1.2276.

GBP pushed higher across the board after better than expected labor market data. The claimant count unexpectedly fell in July by 5.9K after rising 1.0K in June, the claimant count rate remained steady at 4.9% and ILO unemployment rate ticked lower to 8.0% from previous 8.1%. However, the Olympic games hiring could have skewed the figures.

MPC meeting minutes from August 2^nd meeting showed unanimous backing of unchanged bank rate and QE. Some members mentioned a good case for additional asset purchases. GBPUSD touched the 1.57 handle but later declined to a current 1.5685.

After falling from 1614 to 1589 on the back of solid retail sales figures, gold continues to trade near session lows under the 1600 handle. Expectations of further stimulus declined but until Jackson Hole symposium by the end of August provides some clarity on QE, gold is unlikely to break out from the current consolidation.

Spanish and Italian 10 year yields are slightly lower at 6.66% and 5.79% but the German benchmark 10 year bund hit the highest level since July at 1.51%.

The US session will begin at 8:30 am ET with CPI that is expected to ease to 1.6% in July from 1.7% in June. Core CPI is seen steady at 2.2% y/y. Empire state manufacturing is anticipated to decline to 6.6 in August from previous 7.4.

30 minutes later will the department of the treasury release the net long term TIC flows that are expected to decline to USD 41.5 bln in June from May's USD 55 bln. Capacity utilization and industrial production are due at 9:15 am and they are both anticipated to rise in July to 79.3% from 78.9% and to 0.5% from 0.4% respectively.

Patrik Urban