GBP: Inflation rebound not concerning – ING

FXStreet Insights Team FXStreet

The release of January’s UK inflation data this morning has had little impact on the pound. Headline CPI accelerated to 3.0%, just above our 2.9% forecast and the consensus of 2.8%. However, this is primarily due to an unexpected surge in food prices in January, and markets are attaching little weight, ING’s FX analysts Francesco Pesole notes.

A move to 0.820 is not out of scope

"Services inflation came in marginally lower than expected at 5.0%. Although this marks a 0.6% acceleration from last month, December's figures were artificially low due to improper measurement of Christmas airfares."

"More significantly, our measure of core services, which excludes volatile items (including airfares) and rents, has shown steady improvement, now at 4.2%, down from 4.7% two months ago. We expect this benign trend in services inflation to persist in the second quarter and support our projection of one rate cut per quarter this year."

"EUR/GBP broke below 0.8300 yesterday as the euro continued to show idiosyncratic underperformance likely linked to the EU’s geopolitical isolationism relative to the US. We’d be careful picking a bottom in the pair just yet, and a move to 0.820 is not out of scope. In the longer run, we deem at least 25bp worth of dovish repricing is due in the GBP curve, which should offer some support to EUR/GBP."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold loses the grip; $4,000 comes next on the downside

Gold sets aside two daily advances in a row on Friday, opening the door to a potential test of the key $4,000 mark per troy ounce. The precious metal’s retracement follows a decent improvement in the sentiment surrounding the US Dollar, solid NFP data and higher US Treasury yields across the board.

Democrats win House and Senate in US midterms: Why isn’t all bad news for crypto

The biggest story this week was Tuesday’s US midterm elections, which saw Democrats win control of both the House and the Senate in a clear blue wave. This political shift in the US has triggered sharp price swings across the cryptocurrency market.

Week ahead – Inflation and geopolitics in focus as US political landscape shifts

Post-midterm election euphoria fizzles out as risk aversion prevails. US CPI, PPI and Fedspeak on the radar as Fed hike bets remain supported. Oil retreat pauses on mixed hopes about the ongoing conflicts.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.