Sterling and Euro Rally After Soft US CPI Data
A soft US CPI reading halted the dollar's rise against G10 currencies, propelling the pound to GBP/USD 1.3404.
Dollar Pullback and the Pound’s Surge
The dollar slipped after the soft US CPI report, allowing sterling to climb %0.10 to 1.3404. The euro fell %0.06 to 1.1414.
UBS Strategist’s Market Take
UBS strategist Alvise Marino noted that June’s weaker US CPI eclipsed the Middle‑East geopolitical support for the dollar. Key points:
Fed Policy Outlook and Inflation Expectations
Fed Chair Kevin Warsh, in the Humphrey‑Hawkins testimony, warned against tolerance for persistently high inflation. Governor Christopher Waller echoed that a strong core CPI would necessitate further rate hikes. Markets continue to price a 25‑basis‑point hike by year‑end, with the timing shifted to Sept 16‑Oct 29.
Euro Weakening and Regional Drivers
ING’s Chris Turner said the euro benefited from the soft US CPI, but rising European natural‑gas prices—driven by Gulf tensions reverting to mid‑March levels—are capping the pair. Critical zones:
UBS Targets and Market Forecasts
UBS projects the following third‑quarter levels:
These targets may be revised if oil prices rise and tensions in the Hormuz Strait ease.
Ozan Demirci – The dollar’s long‑term weakness hinges not only on softer US inflation data but also on a de‑escalation of Middle‑East geopolitical risks. Removing the asymmetric oil‑price risk will allow GBP and EUR to sustain upward momentum against the dollar. The current market setup, combined with the Fed’s potential rate‑hike pause and UBS’s near‑term targets, tilts risk appetite toward a modest risk‑on stance.