EURGBP TECHS: Corrective Pullback Extends

• RES 4: 0.8835 High May 3 2023  
• RES 3: 0.8800 Round number resistance
• RES 2: 0.8781 2.236 pro of the Mar 3 - 11 - 28 price swing
• RES 1: 0.8735/8769 High Aug 3 / High Jul 27 and the bull trigger 
• PRICE: 0.8643 @ 16:00 BST Aug 12
• SUP 1: 0.8612 50-day EMA 
• SUP 2: 0.8611 Low Jul 31 
• SUP 3: 0.8540 Low Jun 30 
• SUP 4: 0.8508 Low Jun 27

EUR/GBP corrected lower last Thursday on the BoE rate decision, which sent prices through the weekly low. Despite the intraday weakness, support to watch remains out of reach for now at the 0.8612 50-day EMA. A clear break of it would strengthen a bear threat. More broadly, the trend set-up is bullish. Moving average studies remain in a bull-mode position highlighting a clear uptrend. Key resistance and the bull trigger is at 0.8769, the Jul 27 high.

We've just published our US Inflation Insight for July's CPI data: Download Full Report Here

• The July CPI report saw further acceleration in monthly core inflation but it was driven by the volatile supercore category. Instead, core goods inflation, an area of focus for tariff passthrough clues, was surprisingly soft. This category only maintained the still-solid monthly clip seen in June, whilst median core goods inflation moderated after a strong increase in June.
• Core CPI inflation was exactly in line with the median unrounded analyst estimate we had seen for July at 0.32% M/M, accelerating from 0.23% in June and 0.13% in May for its strongest month since January.
• The report saw a firming up of 25bp cut expectations for the next FOMC decision on Sept 17, with 24bp priced vs 21bp prior, and 61bp of cuts to year-end. The path nears dovish extremes seen after the surprisingly weak July nonfarm payrolls report on Aug 1.
• Eyes will firmly be on Powell at Jackson Hole next week but we still get Aug NFP/CPI data before Sept 17.
• Ahead of Thursday’s PPI release, core PCE tracking looks to be around 0.25% M/M after 0.26% in June. 

The Bank for International Settlements estimates the growth impact of announced US tariffs on US "short-term growth" at around -1.0 percentage points according to an economic bulletin published earlier today.

• That is within the range of other estimates from existing literature they cite (see chart B below).
• For the Euro area, they see the negative tariff impact as non-material.

Elsewhere in the bulletin, they comment on the broader effects of tariffs on metrics including financial conditions and trade diversion. Link here: https://www.bis.org/publ/bisbull110.pdf