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CPI key release for USD

Thursday 12 January, 2023

Daily Currency Update

There was no UK data of note yesterday and data was also thin on the ground elsewhere. Italian retail sales month-on-month was one of the low-key releases announced yesterday which showed November 2022 value sales increased by 0.8% in the month-on-month series and volume grew by 0.4%. The release beat expectations (-0.3%) and the adjusted previous release (-0.3%). In the past 24 hours, GBP/USD continued to trade within a narrow range touching 1.2180 at the highs and 1.2110 at the lows. GBP/EUR has also seen movement within a narrow range but did break below 1.1300. The currency pair touched 1.1260 at the lows after falling early from 1.1320. More direction will be given to these Sterling currency pairs in the next 48 hours as we anticipate US CPI data today and UK GDP on Friday. The latest inflation data from the US is due at 1:30 pm this afternoon, where CPI year-on-year data is expected to fall further from the July 2022 peak of 9.1% - 6.5% expected, core CPI peaked in September at 6.6 and is expecting a December year-on-year fall to 5.7%.

Key Movers

Market participants’ eyes will be fixed firmly on the US December consumer price index later today. There is an expectation that the Federal Reserve will slow the pace of its interest rate hikes when they next meet in early February, but policymakers have been very keen to make clear that such a decision is data-dependent. The consumer price index is one of the key data releases to gauge their progress in reining in inflation. A fall in year-on-year CPI and core CPI is expected today, but a lower-than-predicted announcement would raise expectations that the Fed will only raise interest rates by 0.25% in February. If the release is as expected or worse, the predictions will increase that a 0.50% increase will occur. This leaves USD movement in the balance over the next 24 hours as a lower-than-expected release will likely see a sell-off in the USD, whereas the opposite will be seen if the announcement is higher than forecast. GBP/USD has recently been above 1.2200 since January and above 1.2400 in December, but it has also been under 1.1900 over the same time span. The movement towards the levels could be tested again on the announcement. EUR/USD is trading at the highest level since April 2022, currently sitting at 1.0770. A push towards 1.1000 could be seen if CPI comes in less than expected, but a movement towards 1.0500 would be seen if not.

Expected Ranges

  • GBP/USD: 1.2020 - 1.2280 ▲
  • GBP/EUR: 1.1190 - 1.1440 ▲
  • GBP/AUD: 1.7440 - 1.7750 ▲
  • EUR/USD: 1.6020 - 1.0890 ▲