Dear Reader,

Today's overview of economic news and market action:

• Risk averse tone to investor sentiment continued yesterday …
• Market rate hike expectations firmed amid elevated UK inflation …
• However, the euro was in the ascendancy on currency markets …
• Sees EUR/USD open in the top half of $1.09-1.10 …
• EUR/GBP is operating above the 86p threshold …
• GBP/USD is at the midpoint of $1.27-1.28 …
• Today, main focus will be the BoE meeting …
• Market expectations are currently split down the middle between a 25 or 50bps hike …

ECB’s Strong Four-hand

The Euro area economy has lost considerable momentum since last summer.

ECB hikes rates by a further 25bps, but not done yet

As had been widely expected, the June meeting of the ECB’s Governing Council saw the central bank raise rates by a further 25bps, pushing the key deposit rate up to 3.5%.

ECB Sticks to the Tightening Script

The Euro area economy has lost considerable momentum since last summer. GDP fell by 0.1% in the final quarter of 2022 and again in the opening quarter of 2023, with the economy thus entering a technical recession.