Dollar Weakness Continues Amid Stronger Global Economy

The US dollar has been experiencing a decline in value due to weak inflation and labour market figures. The slowdown in consumer price inflation initially strengthened the USD, but a slower pace of producer price inflation from 5.5% to 4.7% y/y weakened it instead. The forward market expects rates to remain on hold until December, which is weighing on the USD index.

Data on Unemployment Claims also put pressure on the US dollar, with initial claims rising to 209K. Other currencies capitalized on the US dollar's retreat, particularly the UK pound, which benefited from strong economic growth of 0.4% q/q in April-June and 1.6% y/y.

The Bank of England (BoE) Chief Economist Hugh Pill believes that this growth should prompt the central bank to raise its repo rate. However, going forward, GDP is at risk of slowing, which will put pressure on GBPUSD.