UK's pound tipped against dollar, euro ahead of U.S. CPI data

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UK's pound tipped against dollar, euro ahead of U.S. CPI data

The pound tipped against the dollar and the euro in early London trading on Wednesday, shrugging off post Brexit trade issues over Northern Ireland, while market participants watched the European Central Bank meeting and U.S. CPI data ahead on Thursday.

The currency markets have generally been very slow this week for the two events expected on Thursday to be market moving.

At 0757 GMT, Sterling was up 0.1% versus the USD, at $1.4169, since mid-May it has traded in a tight range since now.

Versus the euro, it was 0.1% above 85.97 pence to be exchanged per euro.

Sterling-dollar implied volatility gauges with one-month maturities are at their lowest since February 2020, suggesting that market participants are not bracing for significant price action.

Limited data points today and the market being fully focused on the ECB and US May CPI tomorrow suggest weak prices in EUR GBP and USD today, wrote ING strategists in a note to clients.

On Wednesday, Britain's Brexit minister, David Frost, is meeting the European Commission Vice President Maros Sefcovic in Northern Ireland to try to resolve the differences over the trading arrangements in London.

Brussels accuses London of breaking the agreement by failing to enforce checks on some goods moving from Northern Ireland to its province of Britain, and has started legal action over the UK's unilateral extension of a grace period.

So far, months of talks have done little to break the deadlock and Britain said on Tuesday that it would tell the European Union that time is running out to find solutions.

U.S. President Joe Biden is traveling to Britain on Wednesday where he will participate in the G7 summit.

Boris Johnson has a meeting on Thursday with British Prime Minister Charles Davies.

In a note to clients, Rabobank said senior FX strategist Jane Foley that although currency markets have largely ignored the post Brexit trade tensions between Britain and the EU so far, it is possible that any involvement by Biden this week will raise awareness of the difficulties the UK has with the protocol but also with other trade negotiations post Brexit.

Given the optimism about Eurozone economic outlook and the possible headwinds faced by UK, the pound may struggle to break higher in the coming weeks on the euro, according to Foley. Some interesting fact about the U.S. history of what makes up a typical person is that there is no way to get in trouble if you think someone may not be interested in meeting an interview.

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