British Pound comes back in focus ahead of the inflation reading today

General market theme
Over the past 24 hours the price action in the currency markets was limited as we expected being the beginning of the week and with little in terms of news or reports to trigger a reaction from traders. This is an event-heavy week but the first day of it was light on anything that could attract market participants’ attention, however this will change starting today and we expect volatility to pick up and the majors to start reacting to the fresh stimulus provided. The broader market theme remains Dollar’s weakness and now the question becomes whether the likes of the Euro and the Pound can benefit and print fresh highs over the next few days.

Price action highlights
The Euro remained largely on the top half of its sideways trading range spending most of the day above the 1.1400 level but with limited appetite to break above the 1.1450 barrier. However as the Euro spends more time trading around that area the more likely a break towards the 1.1500 level becomes and what is needed is a spark or a fresh piece of news to spur traders to bid on the Single currency. This might have to wait another day today though as there is nothing on the calendar today that would provide the necessary momentum for the Euro to overcome its current resistance.

The Cable however has been rather active during the first 24 hours of the week and the UK currency has rallied from the 1.4100 area to trade above the 1.4200 resistance and almost make it to the 1.4300 level yesterday. There was nothing in the news or any fresh reports or developments that could trigger the move so it could only be an attempt of a  technical correction from the Pound ahead of today’s inflation data. Analysts expect inflation to have improved over the past month and that could be the reason for the bullish bias in the Pound over the past 24 hours and if the reports print as expected we could see a further extension towards the 1.4320 highs of last week.

Focus of the day
The focus today falls on the Pound with the release of the UK inflation levels in the form of the Consumer Price Index and as we mentioned above expectations are set for a bullish reading that could prompt the UK currency to rally more. Other than that the rest of the calendar is empty with the exception of one more Fed policymaker speaking in public later in the day and as always it’s worth hearing where the Fed stands on its current policy.