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  • richard evans

USD choppy ahead of US inflation data

Good morning, and happy Valentines Day. The postman seems to have missed my house this morning, perhaps he’ll come back later.

UK unemployment numbers were released early this morning and showed UK’s labour market remains quite tight with a drop in the number of claimants and a rise in regular average earnings. We should be pleased with this data given the concerns over the economy, but they suggest it will be harder for inflation to slip back to target.

GBP benefitted from the release, GBPUSD pushing to a high of 1.2170 having been down in the mid-1.20s yesterday morning. Currently 1.2155, perhaps the more interesting move is against EUR, with GBPEUR testing this 1.1330 area as it has a few times in the past couple of days, but so far failing to break above there. GBP was also helped by reports that we could see an agreement made between EU and UK over the NI protocol in the next week or two.

US inflation numbers will be the key today, the headline m/m and y/y numbers expected to come in around 0.5% and 6.2% respectively. I mentioned last week the stronger Adobe Digital Price Index which may suggest a firmer US CPI number. Anything above expectations is likely to see USD push higher although I think it would take a lot for the Fed to change their current expected policy path of a couple more 25bps rate rises, so perhaps impact on USD upside will be limited.

There could be more risk of a move should we see a a weaker reading, as this could put Fed policy into some doubt. USD could weaken which could see GBPUSD to mid-1.22s and EURUSD above 1.0800. I’ll be watching with interest but I don’t feel inclined to look for short term trades on this release. We do have a few Fed officials speaking later in the day so we’ll be able to see what they have to say about inflation.

USDJPY moves a little lower on the slightly weaker USD we are seeing but the pair was not really impacted by the confirmation that Ueda has been nominated for BoJ governor. Now 132.00, USDJPY could be one of the currency pair more susceptible to US CPI.

NZD is lower after the RBNZ inflation expectation release overnight, I had thought we may have seen an even softer NZD after extreme weather has led to a rare declaration of a state of emergency. GBPNZD just reaching 1.9200 for the first time this month and looking to make new highs since 20 Jan.

We have enough bad news from around the world with earthquakes, cyclones, wars etc. The last thing we need is more bad news. So imagine my horror when I saw the headline that Lilt, with the totally tropical taste, and a rather pleasant refreshing drink, was being scrapped. As it turns out, it is being rebranded into Fanta, Grapefruit and Pineapple, rather than being taken off our shelves altogether. I’d possibly add a little bit about whether there is a need to change such things, but I’ll just end up sounding like a moaning old man so I’ll leave it there.

- 10.00 EU GDP

- 13.30 US CPI

- 16.00 Feds Logan speaks

- 16.30 Feds Harker speaks

- 19.05 Feds Williams speaks

- 00.15 RBAs Lowe speaks

- 07.00 UK CPI, RPI, PPI

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