General market theme
There has been choppy price action over the past 24 hours in the major instruments we monitor in our daily report, as we saw inconsistent momentum and a few changes in direction during yesterday’s session.
The focus was on the UK and US inflation figures, but it seems that investors are little interested about fundamental drivers at this time, especially when it comes to the pound. As such, the price action becomes a bit unpredictable as the markets start to trade without any real purpose.
Today market participants’ attention will remain focused, as there’s more important data coming in with the UK employment market report, the Eurozone inflation figures and finally the release of the Fed minutes from their last meeting.
Given the current pause in dollar’s recent rally and the doubts over its outlook, the release of the FOMC meeting minutes might further clarify the central bank’s intentions.
Price action highlights
The euro tried to move to the upside, but this attempt failed and the currency corrected lower for no apparent reason, given that the recent demand for dollars has cooled off. The rate dropped from the 1.1350 highs to trade as low as 1.1280 at the time of typing this report, however the bias remains mixed.
Today’s inflation figures from the euro area are expected to print in a steady manner, and combined with a bearish FOMC minutes release it could allow the euro to look to the upside once more with the 1.1350 highs being the area of interest.
The cable pushed radically higher yesterday ahead of the inflation report, as investors were hoping for a bullish release that would confirm the recent BoE comments on the rising prices’ growth. However, the report missed its mark, and a strong correction followed that took the pound off the 1.4500 area and drove it lower.
This morning we find the pound trading around the 1.4430 level, and its price action today will hinge on the way the employment data will print. The bias remains bearish, but we’ve seen quite inconsistent performance from the cable recently, thus caution is advised.
Focus of the day
Eurozone inflation and the UK employment figures are the two important reports this morning, and we expect them to affect the price action in the euro and the cable as we detailed above. Later in the day though the attention will be on the release of the Fed minutes, and caution is needed as this event holds a special significance for investors.
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