July 16, 2025

“US CPI gave the dollar a boost yesterday as markets focused on the details rather than the headlines, while hot UK CPI this morning has failed to do the same for the pound. US producer price inflation is the main event today, and the UK jobs market will be in focus first thing tomorrow.”

Tim Hallinan – Trading Director

USD

US core inflation printed lower than expected yesterday, but there seemed to be enough evidence among the details that tariff-driven price rises were on the way. That handed the dollar a 0.7% boost as markets trimmed their bets on a rate cut in September. Many tariff-sensitive components jumped to levels not seen for months, including household furnishings, which jumped 1% month-on-month, and apparel, at 0.4%. It is still early days, and most are expecting the full effects to start materialising over the next few months – including Chair Powell – so it will be the July and August prints that determine whether we get that September cut. Today’s producer inflation data will give an insight into price pressures building in the pipeline and tends to be a good early warning sign for spikes in consumer prices. It is expected at 0.2% m/m. We also get speeches from the likes of Barkin, Hammack, and Bostic at the Fed today.

GBP

There is little appetite to bid up sterling this morning, despite a hot CPI inflation print this morning. It rose from 3.4% to 3.6%, confounding estimates for it to stay steady, largely due to the unmoved 4.7% services inflation figure. Even though the uptick in CPI since April can mostly be explained away through regulated price rises, the data is putting the Bank of England in a difficult position. While the weakening labour market is crying out for a rate cut, the stickiness in the inflation data is constraining policymakers’ ability to do so. This challenge and its implications for growth are probably why the pound has been unable to gain from the slightly more hawkish rates profile. Tomorrow morning’s jobs and wage data will be key – if last month’s 109K drop in payrolls is not revised down then we can expect sterling to sink further.

EUR

The euro has been following broader movements in the market this week, with few major macro events until next week’s ECB decision. There has been some political drama in France, however, and where the government is once again at risk of collapse following PM Bayrou’s suggestion that they cut two national holidays – something the RN’s Le Pen was naturally unhappy about. FX is unfazed for now, but the euro could struggle if things go sideways. Today’s only data point is the trade balance for May.

Markets

Stocks struggled broadly after yesterday’s US CPI inflation data as markets trimmed their bets on Fed cuts this year, and futures are pointed down this morning.

Main Economic Events (All Times CET)

8:00am: UK CPI
2:30pm: US PPI
3:15pm: US Industrial Production

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