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All eyes on the US CPI

Daily Currency Update

Data early this morning has shown that the UK claimant count increased by 30,500 in November, while the October unemployment rate rose to 3.7% from 3.6% the prior month, as the labor market began to feel the repercussions of the slowdown in consumer spending. The news follows yesterday’s early release from the UK where UK GDP rose 0.5% in the month of October, beating the forecast of 0.4%. GBP/USD has traded between 1.2250 and 1.2295 through yesterday and this range has been maintained overnight. GBP/EUR continues to trade above 1.1600, reaching 1.1660 at the highs.

Today we anticipate the Bank of England governor Bailey to speak at 11 am. He is due to hold a press conference about the Financial Stability Report, in London which will be deciphered for interest rate clues ahead of the interest rate decision on Thursday. Consumer inflation data is also due from the US this afternoon, 1:30 pm. There is likely to be a little more volatility in GBP/USD over the space of today and ahead of UK CPI data early tomorrow morning.

Key Movers

Market participants will anticipate today’s US consumer price index for November which is expected to show a moderation in the annual pace, to 7.3% from 7.7% the prior month, while the core inflation remains steady at 0.3% month-on-month. Concerns that inflation may remain at elevated levels could prevent the Fed from beginning to slow its aggressive rate rises with its latest policy meeting tomorrow. In Europe, the annual German CPI figure came in at 10.0% for November, down from 10.4% the prior month. Eyes now turn to further data from the same region as Eurozone’s biggest economy is set to release ZEW economic sentiment survey, which is expected to show a slight improvement in confidence. EUR/USD has seen substantial gains over the past three months, taking the pair below parity to trade back over 1.0500. However, if inflationary concerns continue forcing the Fed to maintain its aggressive interest rate hikes this could see a reversal. The pair opens at 1.0530.

Expected Ranges

  • GBP/USD: 1.2190 - 1.2370 ▲
  • GBP/EUR: 1.1610 - 1.1690 ▲
  • GBP/AUD: 1.8050 - 1.8220 ▲
  • EUR/USD: 1.0480 - 1.0590 ▲