USD stronger ahead of key inflation data today

United States Dollar:

GBP/USD has continued to trade with softer tone this week. It was dragged lower by sales in EUR/USD yesterday morning, this following ECB president Draghi’s comments over the weekend. There are also some concerns for developments in Ukraine which is in turn having an impact on risk demand – in the latest development, the US president has urged Putin to try and make pro-Russian separatists in eastern Ukraine stand down. Meanwhile GBP/USD has fallen back below 1.67 in the last hour or so, this after The People’s Bank of China withdrew 172 billion yuan from markets on Tuesday. The latest worries over the state of China’s liquidity have seen Asian stocks drift lower and so too the pound and euro. GBP/USD opens this morning at 1.6697 ahead of UK and US inflation today. The year on year UK CPI is expected to fall to 1.6% whilst the US rate is expected to rise to 1.5% from 1.1% last time around. Later on in the day Fed Chair Janet Yellen is due to speak and so we could be in for a volatile day in markets. We expect a range today in the GBP/USD rate of 1.6650 to 1.6760.

Euro:

EUR/USD has lost more ground over the last 24 hours. It started following Draghi’s comments over the weekend and it’s these comments that have continued to reverberate around financial markets over the last 24 hours. Other ECB officials have since been on the wires; Christian Noyer said in an interview with CNBC yesterday that the recent appreciation of the euro was not appropriate. He went on to say “we still hope that it might correct itself naturally, but if need be we are ready to act.” Meanwhile the German Finance Minister echoed these sentiments saying that any further strengthening of the euro could have a negative impact on the economy. EUR/USD is now testing a break below 1.38, this following the latest liquidity draining exercise by the PBOC overnight. German ZEW (an important economic sentiment index) is due for release today and as well as US data it will likely make for a busy day for EUR/USD traders. We expect a range today in the GBP/EUR rate of 1.2040 to 1.2135.

Aussie and Kiwi Dollars:

AUD/USD has been fairly steady over the last 24 hours. The news out of China has been the main driver of its recent fall back below .9400. There wasn’t much of a reaction to the RBA minutes released overnight. The key points to take from the board minutes were that the AUD was still high by historical standards and that the cash rate would remain steady for some time. The NZD has also lost a bit of ground and opens in London at .8645 vs. the US dollar. Investors will be watching out for Chinese GDP and Industrial Production early tomorrow morning as well as NZ CPI later tonight. We expect a range today in the GBP/AUD rate of 1.7700 to 1.7890. We expect a range today in the GBP/NZD rate of 1.9250 to 1.9400.

Data Releases for the next 24 hours:

AUD: MI Leading Index m/m

EUR: German ZEW Economic Sentiment, ZEW Economic Sentiment, Trade Balance

GBP: CPI y/y, PPI Input

NZD: CPI q/q

USD: CPI, Empire State Manufacturing Index, Fed Chair Yellen Speaks, TIC Long-Term Purchases, NAHB Housing Market Index