In June 2024, the UK inflation rate exhibited a steady trend, providing a sigh of relief for policymakers and consumers alike. The Office for National Statistics (ONS) reported that inflation rates held firm at 2% despite soaring hotel prices. Following the latest release of the UK Consumer Price Index (CPI) data, the GBP/USD remains below the 1.3000 mark. Here’s a breakdown of the key events and data points influencing this trend.
GBP/USD Trades Below 1.3000
The GBP/USD pair continues to trade below the 1.3000 level during Wednesday’s European session. This comes after the UK’s inflation data showed that the annual CPI inflation rate held steady at 2% in June, aligning with market expectations and limiting any upward momentum for the Pound Sterling.
GBPUSD 4-hour Chart
June 2024 UK Inflation Overview
Key Statistics
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) saw a 2.8% increase over the 12 months to June 2024, maintaining the same rate as observed in May 2024. On a monthly scale, CPIH increased by 0.2% in June 2024, aligning with the rate in June 2023.
Similarly, the Consumer Prices Index (CPI) recorded a 2.0% rise over the 12 months to June 2024, consistent with the annual rate reported in May 2024. Month-over-month, CPI grew by 0.1% in June 2024, matching the rise seen in June 2023.
Major Contributions
- Upward Pressure: The most significant upward pressure on both CPIH and CPI annual rates originated from the restaurants and hotels sector, particularly due to rising hotel prices compared to the previous year.
- Downward Pressure: In contrast, clothing and footwear contributed the most significant downward pressure, as garment prices fell compared to the previous year’s increase.
Core Inflation
For core inflation metrics, which exclude energy, food, alcohol, and tobacco:
- Core CPIH: Rose by 4.2% over the 12 months to June 2024, consistent with May’s rate. The annual rate for CPIH goods decreased from -1.3% to -1.4%, while the CPIH services annual rate climbed from 5.9% to 6.0%.
- Core CPI: Increased by 3.5% over the 12 months to June 2024, unchanged from May. The annual rate for CPI goods dropped from -1.3% to -1.4%, whereas the CPI services annual rate held steady at 5.7%.
| Metric | Annual Change (%) | Monthly Change (%) |
|---|---|---|
| CPIH | 2.8 | 0.2 |
| CPI | 2.0 | 0.1 |
| Core CPIH | 4.2 | – |
| Core CPI | 3.5 | – |
EUR/USD Rises Above 1.0900 Amid Fresh USD Weakness
Meanwhile, the EUR/USD pair is trading close to the 1.0900 mark in Wednesday’s European trading session. The US Dollar experienced a decline amidst growing speculation of a September rate cut by the Federal Reserve, supporting the Euro against the Dollar. Traders are closely watching mid-tier US data and remarks from Federal Reserve officials.
US Dollar and EUR/USD Dynamics
The US Dollar initially gained strength following stronger-than-expected Retail Sales data, but this momentum faded by the end of Tuesday’s North American session. Consequently, the USD Index hovered around the low-104.00s, allowing the EUR/USD pair to recover and reclaim the 1.0900 level after previously dipping below this round number.
ECB Policy Outlook
The macroeconomic landscape remains stable, with the European Central Bank (ECB) expected to keep its policy rate unchanged during its upcoming July 18 meeting. However, markets are still anticipating two additional rate cuts by the end of the year. President Lagarde and other ECB members are likely to debate recent economic progress amid various global developments.
Euro Area Economic Conditions
Since early June, the euro area’s economic momentum has been waning. The latest PMI surveys and German IFO and ZEW surveys indicate that political developments in Germany and France are creating economic uncertainty. Germany faces budgetary issues with an upcoming federal election, while France operates under a caretaker government, preparing to host the Summer Olympics. Market expectations do not foresee an interest rate change on Thursday, with any potential rate cuts likely delayed until September.
Bitcoin Soars Amid Political Waves
Defying last week’s trough, the crypto market’s resurgence continued unabated, with Bitcoin (BTC) reaching its highest value in four weeks on Tuesday. BTC broke past the $65,000 threshold for the first time since late June. This notable ascent in Bitcoin’s price has been significantly shaped by the shifting political tides, especially those involving former President Donald Trump. The cryptocurrency market has reacted favorably to Trump’s rising re-election prospects and his pro-digital currency stance, fueling investor confidence and propelling the upward trend.
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