US CPI Inflation Offers USD Support (EUR/USD, GBP/USD), German CPI Inflation Met Expectations (EUR/GBP)
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Summary:
- The Pound suffered significant losses against all other currencies.
- The ECB is still predicted to be hawkish.
- US CPI Inflation offered USD
ECB aware of lagging Eurozone
The market is reflecting mixed signals for this currency pair. Klaas Knot of the European Central Bank stated yesterday that because the euro zone is still lagging behind the US in terms of the anticipated terminal rate, it will need to increase into a restricted area. He continued by saying that a few more swift rate increases are required to merely enter neutral territory, with no signs that the target rate of 75 basis points could not be reached for the upcoming meeting. Such arguments support the EUR/USD ahead of today's critical CPI data.
German CPI and HICP inflation figures (YoY) released earlier this morning exactly as expected, causing little market reaction in the EUR/USD. The November meeting is now valued at 70 basis points in the money markets.
EUR/USD Price Chart
GBP suffered significant losses on Thursday
The market is reflecting bearish signals for this currency pair. In the midst of media speculation that Prime Minister Liz Truss may be about to exhibit the pragmatism that she is allegedly famed for in relation to September's budget-like expenditure measures, the pound sterling added to its substantial gains against all comparable currencies on Thursday. Following the declaration that resembled a budget in September, the pound suffered significant losses against all other currencies as well as for UK government bonds.
EUR/GBP Price Chart
CPI inflation supported the USD
The market is reflecting mixed signals for this currency pair. After data showed that U.S. inflation is still on the rise, the Federal Reserve's "pivot" in its cycle of rate increases and the Dollar rally remain as elusive as ever. After it was revealed that U.S. inflation was higher than the market anticipated in September, the dollar gained strength worldwide, boosting hopes for future Federal Reserve rate hikes and lowering the likelihood of a rate cut in 2023.
In expectation of additional rate hikes and a decline in international equity markets, the dollar increased substantially.
GBP/USD Price Chart
Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
