A Big Day for the USD and the GBP, with Yellen and UK Data in Focus

After a particularly quiet start to the week, things will certainly begin to get interesting, with the markets looking ahead to this morning’s June claimant count and May unemployment rate and wage growth figures out of the UK, ahead of FED Chair Yellen’s testimony to Congress.

The pound has been the victim of particularly weak economic data of late, with even the BoE Governor and the foot soldiers unable to prop the pound at $1.30 levels ahead of the next MPC decision.

As we have heard through the year, the neutral monetary policy position of the BoE was largely attributed to a downward revision to the outlook for UK labour market conditions through the 2^nd half of the year.

Today’s figures will provide the markets with an idea on whether recent hawkish MPC member commentary will need to be tempered ahead of August’s MPC meeting.

There’s certainly plenty of confusion ahead of today’s data, with the markets showing the disappointment on Tuesday, following Broadbent’s silence on the UK economy and views on monetary policy.

Positive numbers today will certainly lift the pound to $1.29 levels against the Dollar, with a possible run at $1.30 levels should the negative sentiment towards the Dollar persist, the Dollar bulls yet to regain control, as FOMC voting members talk down the prospects of a final rate hike later in the year.

With macroeconomic data out of the Eurozone limited to May’s industrial production figures for the Euro bloc, we will expect the markets to get ready for Yellen’s testimony through the early part of the European session though, with the FED having just lifted rates and released the 2^nd quarter FOMC economic projections, this time around there may be less impact from Yellen’s comments, unless there is a material shift in view on inflation or the economic outlook, the FED Chair having remained supportive of a 3^rd rate hike later in the year, discounting softer inflation.

Whether the FED Chair delivers a curve ball or not, the testimony will be an interesting one, with Yellen having faced some harsh questioning in recent sessions, with the Republicans now likely to want to turn the screw.

Noise from Capitol Hill will need to be considered through the course of the day, with the U.S president apparently denying any knowledge of Trump Junior’s meetings with Russian officials last year. While the president has managed to stay out of hot water till now, the investigating committee appear to be making good progress and judging by the latest news, it may be a challenge for Trump to get through completely unscathed.

Unsurprisingly, the Dollar has been under pressure through the Asian session, with the Dollar Spot Index hitting an intraday low 95.53 ahead of the European open, the Dollar moving into positive territory at the time of the report.

While the EUR will likely find support off the back of today’s industrial production figures, we will expect the Dollar to continue finding support ahead of Yellen’s testimony, the FED Chair likely to stick to the script on monetary policy, the only area of interest being any discussion on the timing of when the FED will begin selling down its balance sheet.

For the pound, it’s going to be down to today’s numbers and if the numbers are anything like last week’s stats, $1.26 levels could be hit by the close, with any hopes of a rate hike in August likely to be lost.

At the time of the report, cable was down 0.18% at $1.28246, with the EUR flat ahead of today’s numbers, the pressure of Yellen weighing, the FED Chair undeniably more influential than industrial production figures….