By Dhilshan Sandanarajah
Yesterday’s UK CPI results were fairly in line with expectations, as Carney made it clear last week in his report, that short-run inflation would be low. The year on year CPI fell to 0.3% which is the lowest since records began in 1988. Though, GBP/USD was able to make a swift move up to hit the 1.54 mark, as results were in line with last week’s report. The move up was also helped as the USD index plummeted, which allowed EUR/USD to print a high just below the 1.145 mark. However this move up was stunted, as the USD index took a turn in the late afternoon, GBP/USD reached lows just above the 1.53 mark, while EUR/USD went down to 1.138.
With Chinese markets being closed today for a week, the largest gains were the yen pairs as USD/JPY broke past the 119 mark, after days of strong resistance around that level. GBP/JPY was able to make a swift move above the 183 mark and EUR/JPY momentarily broke above 136.
This morning began with UK unemployment figures, as it is now down to 5.7% with claimant count down 38.6k in comparison to the consensus of 25k. This pared with better than expected average earnings with bonus up to 2.1% was very positive for the GBP, as it became clear that Carney’s stance of better wage outlook is likely to prop up inflation in the medium – run. GBP/USD rapidly moved higher and is currently testing highs printed on Monday at 1.544, as GBP/JPY continues it move up from yesterday and breaks above the 184 mark.
Later today will see the release of the FOMC minutes which is unlikely to change the stance of an interest rate hike. Though, hawkish members of the Fed such as Fisher wanting an interest rate hike sooner, as employment figures continue to be positive. Other members are likely to focus on the continuing low inflation in the short-run, as inflation and retail sales have been disappointing in recent months.
That’s the wrap for today, Good Luck with your trading endeavours.