• All eyes are on today’s US June CPI release at 14:30 CET. A 0.3% MoM increase is expected, and any surprise could significantly impact dollar sentiment and delay or accelerate Fed easing expectations.
• The dollar index (DXY) remains in consolidation. A stronger-than-expected CPI could push it higher, but a weaker print might renew downward pressure, especially with risk sentiment improving globally.
• Risk appetite is marginally better today. China’s Q2 GDP came in stronger than anticipated, and Nvidia is reportedly optimistic about resuming exports of its H20 chips to China—potentially signaling a thaw in US-China tech tensions.
• Canada also releases its CPI data today. A downside surprise would likely bring forward the Bank of Canada’s final expected rate cut and weigh on the Canadian dollar.
• EUR/USD remains supported above 1.1650. The market is looking ahead to Germany’s ZEW sentiment index, which should reflect optimism over fiscal expansion, while France prepares to unveil €40bn in spending cuts. Failure to follow through could pressure French bonds and the euro.
• Sterling is underperforming, not because of fiscal concerns, but due to narrowing interest rate differentials. The EUR/GBP cross is nearing 0.8700 as investors speculate the Bank of England might be forced to ease faster than previously expected.
• Tonight, BoE Governor Andrew Bailey will speak at the Mansion House event. He is likely to echo the Fed’s stance: easing could accelerate if the labour market shows signs of real weakness.
• With UK CPI due tomorrow and labour data on Thursday, sterling could see another leg lower if payroll numbers confirm weakness. A move toward 0.88 in EUR/GBP, once a medium-term forecast, could arrive sooner than expected.

What’s Next?
• Sterling’s recent weakness isn’t a short-term noise—it reflects growing concern over UK economic momentum. If the labour market continues to deteriorate, GBP may face deeper setbacks despite hopes of a soft landing.