Traders were focused on the British Pound over the past 24 hours as the release of the Consumer Price Index report was the most high-profile event of the day and investors were looking to receive fresh insight on how the domestic economy is fairing in the UK. Indeed the report printed in a bullish manner for the Pound showing signs of progress for prices’ growth in the UK with the actual reading coming in a bit higher than expecting propelling the UK currency towards its previous highs.
However what is important to note is that even though we saw a higher than expected reading the Cable wasn’t able to break higher from its previous highs and actually remained capped within its broader sideways range. This could be translated as a sign of weakness for the British currency as traders would need something more substantial to drive them to get behind the Pound at this time and we could actually see a correction towards lower levels today as the focus turns to the US.
Today’s important events come from the other side of the Atlantic as the release of the US inflation levels and the minutes from the last FOMC meeting will draw traders’ attention. Both of these events are expected to be bullish for the Dollar but the question is whether their effect be strong enough to spark significant price action. We’ve heard from the Fed after their last meeting during their press conference so the actual minutes need to reveal a strong enough rhetoric for volatility to pick up.
Taking a look at yesterday’s price action and starting with the Euro, the currency dropped to fresh lows around the 1.1015 area as the lack of any fresh news from Europe allowed the Euro to extend its current downtrend. Today the focus will be on the Dollar and with the Single currency having pulled back to the 1.1060 area overnight we could be looking at another swing to the downside if the US inflation levels tick higher. However we’re not too sure whether the Dollar will be able to drive the Euro to fresh lows so our attention would be around yesterday’s lows for our targets today.
The Cable popped higher yesterday on the back of the release of the UK inflation data but as we mentioned above the currency rate remained capped at the 1.5700 barrier. This means that the UK currency is still trading within its broad sideways formation and today we could be in for a correction lower if the Dollar receives support from the US CPI reading possibly driving the rate back near the 1.5600 area of support.
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