In FX, the US dollar index (DXY) rose close to its year-to-date highs during the London morning, before retreating. The DXY is up 0.1% on the day having earlier been as much as 0.45% stronger. There was little reaction to weaker than expected US housing data or the Beige Book released an hour or so ago, which noted that US manufacturers had expressed concern about trade tariffs.
The GBP is again the weakest performing currency in the G10 after headline and core CPI missed expectations. The pound fell to a new year-to-date low of 1.3010 in the wake of the CPI report, although it has since recovered to 1.3060. Despite the move in the currency, the market still assigns around an 80% chance of a BoE rate hike at its meeting next month. UK parliament is due to go into recess next week, returning in early September, although Brexit and UK politics will remain a headwind for the GBP for some time.
The NZD has moved up close to 0.68, supported by the improvement in risk appetite and probably some position squaring after the NZ core inflation surprise on Tuesday (CFTC data showed speculative investors had large net short positions in the NZD). The NZD is the best performing currency in the G10 for the second day running.
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