What’s been happening?

Pound Sterling – UK Markets 

The pound sterling recovered a small part of the losses it suffered against the dollar and the euro earlier this week. The data published by the UK’s Office for National Statistics revealed that inflation, as measured by the Consumer Price Index, stayed unchanged at 2% on a yearly basis in June. The core CPI, which strips volatile food and energy prices, rose to 1.8% from 1.7% in May and matched analysts estimates. Further details of the report showed that the Retail Price Index ticked down to 2.9% in the same period and the Producer Price Index (input) declined 0.3%.

Earlier in the day, following his meeting with European Union Chief Brexit Negotiator Barnier, British Brexit Secretary Barclay said Barnier emphasised a strong desire to avoid a no-deal Brexit and added that he explained to him that parliament was unlikely to pass the Withdrawal Agreement at its current state.

US Dollar – US Markets

The US Dollar Index snapped its two-day winning streak on Wednesday hurt by the disappointing housing data and the cautious tone seen in the Fed’s Beige Book. The monthly data published jointly by the U.S. Census Bureau and the Department of Commerce showed that housing starts in June declined by 0.9% following May’s 0.4% drop and building permits contracted by 6.1% to miss the market expectation for a growth of 0.1% by a wide margin.

Later in the day, the Federal Reserve’s Beige Book reiterated that the economic activity continued to expand at a modest pace overall from mid-May through early July. “The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty,” the publication read.

In the meantime, Esther George, President of the Federal Reserve of Kansas City, echoed Chairman Powell’s view on the policy outlook by saying that they are prepared to adjust the monetary policy if downside risks were to materialize.

Euro – European Markets

The shared currency closed the day higher against the dollar and posted small losses vs the British pound. The Eurostat on Wednesday announced that the Consumer Price Index (CPI) ticked up to 1.3% and the core CPI rose to 1.1% from 0.8%. 

In his prepared remarks, “Looking ahead, the Governing Council is determined to act in case of adverse contingencies and also stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council,” European Central Bank (ECB) policymaker Benoit Coeure said. “Risks surrounding the euro area growth outlook continue to be tilted to the downside.”

What’s coming up? 

UK: The UK’s Office for National Statistics will release the retail sales data on Thursday. The Bank of England is scheduled to publish its Credit Conditions Survey for the second quarter as well.

US: The U.S. economic docket will feature weekly jobless claims data and the Philly Fed’s manufacturing report.

EU: There won’t be any macroeconomic data releases from the euro area on Thursday.