Forex snapshot

GBP/USD charges higher as UK inflation hits Bank of England targets, while EUR/USD continues to hover around the $1.3600 level.

Euro notes
Source: Bloomberg

GBP/USD could retest $1.72

Currently, as they are prone to doing, currency markets are in the process of jumping the gun following confirmation that the UK inflation rate was back up to the BoE target levels of 2%. Previously, it was expected that the BoE would be unlikely to increase the base rate until well into 2015, however this currently being questioned. Confirmation of exactly how hawkish the voting members are will be made clear on the 23 July when voting from the last meeting is announced.

The impetus gained from this announcement may well be enough to see the highs from earlier in the month in GBP/USD once again being challenged, and a retest of the $1.72 region looks likely.

Spot FX GBP/USD chart

EUR/USD gives up its gains

As my colleague Chris Beauchamp stated yesterday, the EUR/USD rate appears to be stuck in a range between $1.35 and $1.37.

As much as Mario Draghi might try, most of the direction in this currency cross is being driven by comments and economic data from the US, and today will see Janet Yellen in front of the US senate select committee to present the semi-annual monetary policy report.

This morning’s ZEW sentiment figures were weaker than anticipated, and any help from increased retail spending to drive the inflation figures for the eurozone higher look unlikely to materialise.

As much as Europe would like to see the euro weaken against the US dollar the economic data is not yet there to support such a move.

Spot FX EUR/USD chart

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