We mentioned yesterday that sterling could struggle to sustain its recent strength in particular against USD and it gave up on the 1.5900 and has now broken below the previous support level of 1.5800, trading at 1.5760 at the time of writing which is a 14 month low. Regardless of better than expected average earnings data in the UK the BOE’s Inflation Report showed how MPC members remain concerned that it’s simply not enough to bring rate hike expectations forward. The use of words such as “tentative” gave the report a dovish weighting and so GBPUSD looks like it will continue to be sold on any strength.
This morning sees a raft of inflation data releases from the Eurozone and whilst these are unlikely to have a huge market impact, they will be interesting to see from a disinflation, or even deflation, point of view. EURUSD continues to hold the 1.2400 level but is yet to show any signs of breaking out of its downward trend.
It’s also worth keeping an eye on the weekly initial jobless numbers from the US as these have seen consistent sub 300k releases in the past month and a half. The dollar rally has been pausing for breath this week and bulls are looking for any excuse to buy more dollars.