Home Daily Commentaries Eyes now turn to US CPI

Eyes now turn to US CPI

Wednesday 11 January, 2023

Daily Currency Update

Early on Tuesday, UK Retail sales data showed a rise of 6.5% in December compared with a year earlier. However, the numbers were deceptive as the growth in December seems to be due to goods costing more and masks the fact that the volume of goods that people are buying is significantly down on this time last year. There was anticipation around Bank of England Governor Andrew Bailey’s attendance at the panel discussion in Stockholm during yesterday’s session, however, Federal Reserve’s Jerome Powell provided sound bites of importance, expressing the Fed used its tools innovatively in the recent crises, with the financial system now substantially more resilient. Market participants would have been monitoring the panel discussion for clues on ongoing interest rate decisions, but no indications were given. GBP/USD traded within a narrow range yesterday, between 1.2120 and 1.2180. GBP/EUR also traded in a narrow range, but lower. There is no macroeconomic data to highlight for the UK today, but we do have Spanish industrial production and Italian retail sales, both for November. Thursday’s US CPI data and Friday’s GDP figures remain the focus for this week. GBP/USD opens at 1.2140 and GBP/EUR has just dipped below 1.1300.

Key Movers

The EUR has recently gained ground again the USD and GBP, despite the lack of heavy-weight macroeconomic data from the Eurozone so far this year. The recent pledge from the ECB to continue to raise interest rates as it tackles inflationary concerns will have certainly backed these gains, but a warmer-than-expected winter with less energy usage has meant no energy ‘shutdowns’ are now likely. A move that would certainly have hit the region’s growth. EUR/USD has risen from the October low of 0.9590 to trading above 1.0750 in the past 24 hours. GBP/EUR has fallen from 1.1650 in December to back below 1.1300. These moves have also been supported by the Fed taking a less aggressive stance on future interest rate hikes as they get a grip on inflation and the uncertainty between policymakers in the UK on future hikes to curb isn’t own inflationary concerns and, in turn, how deep the recession will go.

Expected Ranges

  • GBP/USD: 1.2050 - 1.2210 ▼
  • GBP/EUR: 1.1180 - 1.1340 ▼
  • GBP/AUD: 1.7480 - 1.7630 ▼
  • EUR/USD: 1.0650 - 1.0780 ▲