Sterling opened lower against the US Dollar today following comments from a Federal Reserve official on Wednesday having held below the $1.3900 pivotal level during the Asian session overnight. Against the Euro and for the third day this week, Sterling held above EUR 1.1700 when UK PMI for the service sector came in above consensus as investors/traders await today’s Bank of England policy meeting/statement, any forward guidance is eagerly awaited. Worth noting, British artists were granted visa-free touring to the 19 EU countries in a post-Brexit deal. Furthermore, UK Brexit Minister David Frost teased the solution to industry problems to be unveiled by autumn, spreading positive signals.
The Dollar rallied late in the day when US Fed Reserve Vice-Chair Clarida commented that if core inflation should hit 3% this year, he would consider it “much more” than a moderate overshoot and that he expects conditions for raising interest rates to be met by the end of 2022. This would be if inflation and employment outcomes meet his forecasts, additionally, the ISM Services PMI jumped to 64.1 in July, beating expectations. As a result, stocks/indices fell, an opportunity for investor safe-haven Dollar buying.
With the ‘hawkish’ Fed talk, the Euro fell sharply from weekly highs closing below $1.1850, Eurozone services PMI also undershot expectations yesterday.