The pressure on the sterling returned back with lower inflation data over the consuming level and the producing level too, as the data have shown today that UK CPI retreated to 1.6% year on year in July while the market was expecting 1.8% from 1.9% in June.

UK PPI input prices slid by 1.6% y/y in July while the consensus was falling by 1.1% after slumping by 0.9% in June while the UK PPI out pout prices plummeted by 7.3% y/y and the expectations were referring to 6.5% slide after dropping by 4.5% in June.

While the concerns about the houses prices retreating have been underscored again today by rising of UK DCLG Housing price index by only 10.2% while the consensus was 11.2%from 10.5% in June, after Rightmove housing price index of August came in the beginning of the week to show monthly slide by 2.9% has been the biggest since December 2011 from -0.8% in July.

The sterling has been actually supported in the beginning of the new week by Careny’s Comments that it is not a condition for hiking rate to watch wages rising inflation Pressure in UK.

These comments in the weekend leaded the cable to open on a gap at 1.6715 as the market has been actually focusing on the wages inflation pressure in UK to the limit of dropping the cable following the release of July UK Labor report which has shown that the wages including the bonus the figure came down by 0.2% following rising up by 0.4% in the previous 3 months to May and also wages rising excluding the bonus in the previous 3 months to June by 0.6% from 0.9% in the previous 3 months to May, despite the falling of ILO unemployment rate to 6.4% in the previous 3m to June which is the lowest level since Dec 2009 from 6.5% in the precious 3m to May which has came in the same labor report.

The Cable could not rise for more than 1.6735 to start retreating to reach today until now 1.6633 on the dovish inflation figures of July which suggest longer holding of the interest rate in UK at the current low levels.

While the greenback has been actually supported across the broad by the US treasuries yields rebound which started in the beginning of this week before the release of US CPI which is expected to show yearly rising by 2% down from 2.1% in June.

While the market is waiting also for rebound today with the new housing figures of US in July, after the worries increased about it following June figures which have shown slide of the housing starts to 0.893m from 0.985m in May and also drop of the building permits to 0.963m with falling also of thenew home sales to 0.406m while the market was waiting for 0.479 from 0.442m in May.

Kind Regards

FX Market Strategist

Walid Salah El Din

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