IMF – US and UK Inflation Highlighted – Technical Analysis

| UK inflation was lower than expected in July

UK annual inflation rose for the first time in July this year, but the rise was smaller than expected as prices of services fell. Annual inflation rose to 2.2% in July from 2% in June, but was below expectations of 2.3%. Overall, inflation stood at -0.2% compared to +0.1% recorded in the previous month. In turn, inflation eased to 3.3% from 3.4% expected by the market and 3.5% in June. Annual services inflation eased to 5.2% in July from 5.7% in June, reflecting a strong rise in hotel prices in June. The Bank of England (BoE) expects inflation to rise to 2.4% in July and forecasts 2.75% at the end of the year, before returning to 2% in the first half of 2026. The market now offers a 65% probability. BoE to keep rates on hold in September

Eur/Gbp started off slightly lower on Wednesday, with inflation data out of the United Kingdom. However, in subsequent sessions, the pound rallied, leading the pair in question to pull back from near £0.86 to around £0.85. With this, Eur/Gbp moved closer to its 200-day moving average, which is close to £0.8550. The MACD indicator closed a buy signal for this pair.

| US inflation eases in July

US annual inflation fell to 2.9% in July, below 3% for the first time since the start of 2021, and slightly below the 3% expected and recorded in June. Overall, inflation was 0.2%, higher than the 0.1% fall recorded in the previous month. The 0.4% rise, in a chain, includes rents and the most debated metric in the cost of accommodation, which accounts for nearly 90% of the monthly increase in inflation. There is no change in petrol price after 2 consecutive months. Core inflation came in at 3.2% year-on-year, below an expected 3.3% in June and the lowest update since April 2021. Dollar loses value, refreshes Eur/Usd. December 29, 2023 high $1.1050. Later, however, stronger-than-expected US July retail sales data led Eur/Usd to trade below $1.1000 again and the market assigned an 80% probability of a 25 basis point FED cut in September (previously 55%).

Last week, Eur/Usd showed significant value, approaching $1.1050 and renewing the high of the year (December 29, 2023). However, on Thursday, the pair lost some of its accumulated gains and returned to trade below $1.1000. Eur/Usd is far from the 200-day moving average, which is at $1.0840, and the respective MACD indicator has opened a buy signal for the pair.

| Oil renewed 3-week highs

Oil prices opened the week with significant value, while benefiting from expectations of worsening tensions in the Middle East that could reduce global supplies of crude. On Friday, prices fell as the market reflected fears of a slowdown in the economy of China, the biggest oil importer.

Oil opened last week at a 3-week high, just above $80/barrel, after renewing a February 2024 low the previous week. However, the commodity then started to depreciate again until nearing the $77/barrel support, which it broke below on Friday.

| Gold has been renewed to an all-time high

Gold started the week off a renewed 1-month high, benefiting from a perceived safe haven amid heightened fears of tensions in the Middle East. It later corrected and stabilized again, while the market began expecting a FED cut of 25 basis points, compared to the 50 basis points expected earlier. On Friday it renewed a momentary, historic high.

Gold had a positive start to the week, reaching a 1-month high of $2,478/oz before falling to a mid-point of $2,430/oz. By the end of the week, the precious metal rebounded to hit a historic high of $2,500/oz.

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