US CPI print takes centre stage, Euro out-performance continues
As we enter into the back-end of the week with key economic risk events looming, I thought a brief update would be useful.
GBP has been hit by a fall in UK bond yields and as a result the euro continues a run of outperformance as investors brace for further policy tightening at the European Central Bank (ECB). These dynamics leave the pound at its lowest level against the euro since the Liz Truss era.
According to market analyst Michael Brown there’s "notable sterling pressure coming through across the board as gilt yields tumble “.
The GBP/EUR rate has now fallen 0.75% this week, with lows of 1.1258 being noted yesterday. Today’s range is slightly more range bound with price action between 1.1276-1.1304. We are currently trading at 1.1293, with these levels having not been seen since September when the pound was the focus of a financial market storm after the government's 'mini budget'.
GBP/USD continues to trade on the back foot between 1.2133 and 1.2171 as the eagerly awaited CPI print is in focus for later today. The Federal Reserve’s softening of interest rate increases and the anticipation of further easing have put the dollar on the defensive since late last year, ending a surge that brought the currency to a 20-year high in September.
The spotlight is now firmly on the US CPI print at 1:30GMT. Data showing inflation dropping back from 40-year highs has fuelled the assumption that the Fed will scale back its aggressive rate rises.
EUR/USD has also given up its weekly gains and is currently trading flat at about 1.0750. The pair moves to the downside as the US dollar rises, amid a cautious market mood ahead of the US CPI print. US Treasury bond yields have also started to decline, which has aided a move to the downside.
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