Home Daily Commentaries Dollar soars on inflation data

Dollar soars on inflation data

Daily Currency Update

GBP/USD dropped towards 1.19 on Friday as a gauge of US inflation came in higher than expected adding weight to the argument that the US Federal Reserve will have to raise interest rates higher than previously thought. January’s Personal Consumption Expenditure (PCE) reading saw every metric come in higher than expected with the overall reading showing a rise to 5.4% from 5.3% when a drop to 4.9% was predicted. PCE like the Consumer Price Index is released every month however PCE is more focused on day-to-day costs that consumers pay, and this set of hot numbers indicates that price rises cannot just be put down to supply issues but underlying strong demand. GBP has recovered a little this morning as expectations grow that an agreement is set to be announced by the UK and the EU over the Northern Ireland protocol. EU Commission President is currently in the UK ahead of a meeting with UK Prime Minister Rishi Sunak before Sunak gives a speech in parliament later today. GBP/USD is currently at 1.1935 with GBP/EUR at 1.1335.

Key Movers

The US dollar soared across the board on Friday afternoon as the aforementioned hot inflation print. US stock markets saw their biggest drop in over two months as expectations grew that the US Federal Reserve could be forced to hike rates towards 6% and possibly beyond to try and control rising prices. Later today we have US Durable Goods Orders and US Pending Home Sales figures due at lunchtime. From the Eurozone, it’s a quiet start to the week with this Thursday's Inflation numbers this week’s key event. Overall Eurozone CPI is expected to drop from 8.6% to 8.2% and the core reading, which strips out food and fuel costs, is expected to hold steady at 5.3%. EUR/USD mirrored GBP/USD drop on Friday and like the pound the euro has recovered some ground this morning. EUR/USD currently sits at 1.0555.

Expected Ranges

  • GBP/USD: 1.1900 - 1.2030 ▼
  • GBP/EUR: 1.1280 - 1.1390 ▲
  • GBP/AUD: 1.7760 - 1.7945 ▲
  • EUR/USD: 1.05 - 1.0620 ▼