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GBP/USD retraces ahead of today’s Brexit votes and US-China talks

By Alex Edwards

The release of UK CPI yesterday saw inflation fall to 1.8% y/y in January, sliding below 2.0% for the first time since 2017. The new cap on energy prices was the main catalyst for the drop and levels of inflation are now below the Bank of England’s target. It had little impact on cable, however.

Hearsay rumours about the possibility of a further extension to the Brexit deadline were the main driver of GBP/USD, which traded to a high of 1.2960. But, it’s since fallen as the dollar has pushed higher across the board over the last 12-24 hours.

MPs are to debate and vote on the next steps in the Brexit process later, as Theresa May continues to try to get a deal through Parliament. A series of amendments will also be considered for debate.

The US dollar is stronger across the board against most major currencies, back above the 97.00 handle. January’s CPI core inflation data was a little stronger than expected rising 0.2 percent from the prior month and 2.2 percent from a year earlier but had little to no influence.

The greenback is getting bid across the board this morning as investors eagerly await any news on how US-China trade talks are going.

EUR/USD has settled lower over the last 24 hours. A weaker than expected European Industrial Production print yesterday morning didn’t do the single currency too many favours and the sell off in EUR/USD has continued since as dollar bids gather momentum.

Investors now look to US Retail Sales data and US-China trade talks for direction.

AUD/USD has traded a narrow range over the last 24 hours and opens in London at .7105. Traders are reluctant to do too much in advance of the much-anticipated US-China trade talks. With little by way of local economic data on the horizon investors will focus on this as well as a set of China inflation prints, due overnight.

USD/CAD has done very little in the last 24 hours and opens this morning towards the top end of its recent range. Traders will be looking to Canadian Manufacturing Sales today for some direction, albeit the US-China trade talks are the real focus.

NZD/USD is holding firm this morning, following the post RBNZ statement rally – the central bank was a lot less dovish than many market participants were expecting and a short squeeze ensued. Investors will now be looking to local business manufacturing data, as well as US-China talks, of course.