7/9/2021 3:28:00 PM GMT
Core Consumer Price Index (Tuesday, 12.30 GMT) rose in June above 4%, it could push the Federal Reserve to tighten its policy sooner rather than later, beginning by printing fewer dollars. A taper of the bank's bond-buying scheme could benefit the US dollar and put pressure on most major currencies and gold. On the other hand, inflation may have peaked last month – perhaps due to diminishing base effects, the sharp fall in prices seen in the spring of 2020. In that case, the Fed would feel comfortable purchasing $120 billion in bonds for longer.
On Wednesday, investors will also eye the
UK Consumer Price Index (0600 GMT) data for June. Inflation surprised to the upside in May with a jump from 1.8% to 2.1% YoY. Nevertheless, that figure was driven higher by base effects – the fall in prices that time last year. Moreover, the BOE's dovishness also implies inflation is unlikely to surge, which keeps the GBP capped.