Sterling edged modestly higher today after UK inflation surprised to the upside, though gains were restrained. CPI and core CPI both accelerated in June, with goods inflation jumping sharply. The move raises questions about tariff passthrough effects and complicates the BoE’s path ahead.
While a BoE rate cut is still likely in August, the case is now less clear-cut. The Monetary Policy Committee is clearly divided, and hawks like Chief Economist Huw Pill, who dissented in the cut in May, could push back again against easing. Still, even if the easing cycle proceeds, there is little room for BoE to deviate from one cut per quarter to keep policy tight enough to anchor inflation expectations.
For the week so far, Dollar leads FX rankings, followed by Loonie and Swiss Franc. Yen is the weakest performer, with Kiwi and Aussie also under pressure. Sterling and Euro sit in the middle. Overall, the rankings reflect a cautious and not particularly risk-friendly backdrop.
On trade, US President Donald Trump announced a tentative agreement with Indonesia that would fix tariffs at 19%—below the 32% he previously threatened. Trump claimed the deal secures full US access to the Indonesian market and includes substantial purchases of American energy, agriculture, and aircraft. These figures have yet to be confirmed by Jakarta.
Trump’s move adds to recent deals struck with the UK and Vietnam and builds on a interim agreement with China. While many of these arrangements offer only temporary relief from steeper tariffs, they signal some momentum in Washington’s bilateral trade strategy ahead of the August 1 deadline. That said, these deals often preserve some tariff structure, rather than eliminate it. For example, Canada’s Prime Minister Carney noted Tuesday that Trump remains committed to tariffs, suggesting any new deal might come with strings attached.
In the digital asset space, Bitcoin slipped back below 120k as the House GOP scuttled a vote on the GENIUS Act. Speaker Mike Johnson canceled the day’s schedule as conservatives demanded the stablecoin bill be merged with other crypto measures. The delay adds uncertainty to the bill’s future, though Republicans broadly support a regulatory framework.
Technically, some consolidations is likely in Bitcoin for the near term. But outlook should stay bullish as long as 112013 resistance turned support holds. Current up trend should extend towards 135k mark on resumption, where the real hurdle lies. The level includes double major projection levels, 100% projection of 49008 to 109571 from 74373 at 134946 and 100% projection of 74373 to 112013 from 98148 at 135788.
In Asia, at the time of writing, Nikkei is up 0.10%. Hong Kong HSI is up 0.17%. China Shanghai SSE is down -0.15%. Singapore Strait Times is up 0.27%. Japan 10-year JGB yield is down -0.01 at 1.581. Overnight, DOW fell -0.98%. S&P 500 fell -0.40%. NASDAQ rose 0.18%. 10-year yield rose 0.062 to 4.489.
UK CPI rises to 3.6%, goods prices jump, services sticky
UK inflation came in hotter than expected in June. Headline CPI accelerated from 3.4% yoy to 3.6% yoy, above consensus of 3.4%. Core CPI (excluding energy, food, alcohol, and tobacco)also surprised to the upside, rising from 3.5% to 3.7%, versus expectation of 3.5% yoy.
Goods inflation picked up from 2.0% yoy to 2.4%, its highest since October 2023. Services inflation remained stubbornly high, unchanged at 4.7% yoy.
On a monthly basis, CPI rose 0.3%, adding to signs that disinflationary progress may be stalling.
Fed’s Barkin sees inflation stickiness, defends Fed independence
Richmond Fed President Tom Barkin warned that inflation pressures remain persistent, with recent data showing signs of renewed pricing power among suppliers.
Speaking at an event in Baltimore, Barkin noted that many firms—still emboldened by the inflation surge of the past two years—are attempting to pass on rising costs, including those tied to tariffs. However, he cautioned that consumers, fatigued by prolonged inflation, may push back. “You’ve got consumers who are exhausted by inflation, who are already trading down,” he said.
Barkin’s comments also touched on the institutional integrity of the Fed amid speculation surrounding Fed Chair Jerome Powell’s future. With Powell’s term set to expire in May next year, US President Donald Trump is widely expected to nominate a more dovish successor.
Barkin emphasized the importance of policy independence, saying he hoped any new appointee would “try to decide the best policy for the country.” He added that rate-setting decisions aren’t necessarily driven by the Fed chair alone.
Fed’s Collins favors “actively patient” stance amid tariff-driven inflation risks
Boston Fed President Susan Collins said overnight that the Fed should remain “actively patient” in its stance. Despite the complexity of current conditions, she argued that “solid” fundamentals give the Fed room to carefully assess incoming data before making policy moves. “Calibrating appropriate policy in this context is challenging,” she acknowledged in her speech.
Collins highlighted the inflationary impact of newly imposed trade tariffs, which she said are beginning to show up in the prices of some goods. She projected core inflation to climb toward 3% by the end of the year, while warning that growth and employment may slow as a result.
However, she pointed to mitigating factors—such as firms narrowing profit margins and consumers maintaining spending. “As a result, the adverse impact of tariffs on labor market conditions and economic growth may be more limited,” she said.
Fed’s Logan cites fiscal tailwinds, inflation risk in case for rate hold
Dallas Fed President Lorie Logan said overnight that she expects a slight pickup in the Fed’s preferred inflation measure following June’s CPI release and warned against easing policy prematurely. With the PCE inflation gauge at 2.3% in May, Logan said the latest CPI data “probably” means it will “move up a bit.” She stressed the need for a longer trend of subdued inflation before being confident in the disinflation process.
At the same time, Logan pointed to a solid labor market, near-record stock prices, and the recently passed Trump fiscal package as “tailwind” for continued economic strength.
Against that backdrop, Logan argued that the Fed can afford to “hold tight for a while longer,” maintaining modestly restrictive policy to ensure inflation returns to target sustainably.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.3353; (P) 1.3410; (R1) 1.3442; More…
GBP/USD recovers mildly ahead of 1.3369 support and intraday bias remains neutral. Outlook is unchanged that strong support is expected from 1.3369 to complete the correction from 1.3787. On the upside, break of 1.3561 support turned resistance will bring retest of 1.3787 high first. Firm break there will resume larger up trend to 100% projection of 1.2099 to 1.3206 from 1.3138 at 1.3813. However, sustained break of 1.3369 will bring deeper correction back to 1.2706/3206 support zone.
In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.3019) holds, even in case of deep pullback.
