Sterling Rises as UK Inflation Rises for First Time in 6 Months

The Japanese yen declined today after the country released weak economic data. The numbers showed that the country’s economy is indeed in trouble. The core machinery orders dropped by 12.5% in December. This was the worst reading since November 2018. The number has been negative in 8 out of the last 12 months. The orders have dropped by 3.5% in the past twelve months. The country also reported a drop in exports and imports in January. On Monday, the country reported weak Q4 GDP numbers. It could get worse because of the spreading coronavirus illness. The disease has led to low production in Japan and China. Worse, the BOJ and the government don’t seem to have a solution. Interest rates are already negative and it appears like the $122 billion fiscal stimulus from the government is not working.

The British pound rose earlier today as the Office of National Statistics (ONS) released January inflation numbers. The numbers showed that inflation rose for the first time in six months in January. The headline CPI rose by 1.8% from a year earlier. This was higher than the expected increase of 1.6%. The core CPI, which excludes the volatile food and energy products rose by 1.6%. The PPI input rose by 2.1% while output rose by 1.1%. Retail prices rose by 2.7% after rising by 2.1% in the previous month. Analysts believe that this uptake will be temporary. They expect it to move below BOE’s target of 2.0% in the next two years. Meanwhile, Brexit negotiations appear to be having some challenges. This is after Michel Barnier said that Johnson will be to blame if talks break down.

The price of crude oil rose even as traders continue to worry about coronavirus. Brent reached a high of $58.10. It is now in its longest rally in more than a year. The rally is partly because of the decision by the US to place sanctions on a unit of Rosneft, the Russian energy giant. It blamed the company for continuing to have ties with Venezuela’s Maduro. In addition, the market reacted to the ongoing crisis in Libya. Yesterday, fighters shelled an important port in Tripoli, which halted the shipping of crude oil. Elsewhere, gold and palladium continued to rally. Gold reached a high of $1,608, which is the highest level since 2013. Palladium tested a record high of $2,507.

XAU/USD

The XAU/USD pair reached a high of 1,608 as worries of coronavirus continued to mount. The pair has been on an upward trend since February 5, when it was trading at 1,507. The price is above the 14-day and 28-day EMA on the four-hour chart. The RSI has moved to 85, which is its highest level since January. The momentum indicator is also at its highest level since January. The pair will likely continue rallying as bulls overpower the bears.

EUR/USD

The EUR/USD pair continued its descent as the political crisis in Germany continued. Angela Merkel is being pressured to quit as her party tries to find a new leader. This is after her preferred successor, Annegret Kramp-Karrenbauer resigned. The pair is trading at 1.0800, which is the lowest level it has been since April 2017. The price is below all the moving averages. The price is also below the dots of the Parabolic SAR. The downward trend will likely continue as the pair tries to find a floor.

USD/JPY

The USD/JPY pair rose to a high of 110.25 as the market reacted to weak data from Japan. As it moved upwards, the pair moved above the important resistance level of 110.13. The price is above the 14-day and 28-day moving averages while the average directional index has moved to 56. The momentum indicator is also rising. This implies that the pair may continue moving upwards.