GBP received a boost from stronger than expected UK GDP growth of 0.3% in Q2, supported by solid June data. The figures bolstered expectations that the Bank of England could postpone interest rate cuts, lending support to GBP sentiment. However, the currency’s gains were capped by concerns over possible autumn tax increases and persistent global economic uncertainty. In short, while growth data was encouraging, market caution kept the Pound’s upside constrained.
The Euro stayed muted as investors looked ahead to the Trump/Putin summit in Alaska. In the absence of fresh Eurozone data, market sentiment was driven by geopolitical uncertainty. A breakthrough in Ukraine peace talks could lift the Euro by reducing regional risks, while stalled negotiations or negative developments might weigh on it. Concerns over potential strains in US/EU relations also curbed confidence, leaving the single currency adrift in a climate of cautious investor sentiment.
The USD gained support from hotter than expected producer price index data, which revealed a stronger than forecast rise in inflation for July. This fueled expectations that the Federal Reserve will take a cautious approach to interest rate cuts, bolstering USD sentiment. Still, gains were limited as markets continue to price in a September cut. Overall, mounting price pressures kept the dollar broadly underpinned despite lingering uncertainty over the Fed’s policy path.
