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  • richard evans

USD still testing recent lows despite than expected higher US inflation

Good morning


US inflation came out a touch higher than estimates yesterday which served to pull USD from its lows.  GBPUSD traded down from 1.2770 to 1.2690 yesterday afternoon, EURUSD traded down from near 1.1000 to 1.0930.  Since then we have seen a resumption of the weaker USD idea, and as I type GBPUSD is back up at that 1.2770 level, in fact we traded up to 1.2785 overnight, a new high for 2024.   EURUSD is now 1.0975 leaving GBPEUR a touch higher at 1.1640.


For the record, UK industrial and manufacturing production data this morning was softer than expected, but GDP came in at 0.3% rather than the 0.2% that had been expected. 


The key remains whether we see Fed rate cuts in early 2024 and then whether other central banks, namely ECB and BoE look like following suit.  Interesting that USD hasn’t pushed higher on the reports of attacks by UK and US on Houthi forces, usually any sign of conflict seems to send USD higher.  For now, the market has shrugged off yesterdays US inflation number and  further USD weakness looks more likely.  The 1.2800 or 1.1000 GBPUSD and EURUSD calls I looked at yesterday may yet produce returns, I’d initially given up on that idea after the US data yesterday.


Oil prices have ticked higher on news of the attacks on the Houthis but the key now is whether this marks a larger escalation of the conflict or whether the message has been delivered and things now return to ‘normal’, whatever that may be.  I fear we’ve not seen the end of this.


Todays calendar is limited once again but US PPI has been known to get things moving, certainly any higher than expected readings are likely to push USD back higher temporarily, but still be unlikely to change market view of Fed rate cuts this year. 


In other news, I was interested to see that evidence of a huge ancient city in the Amazon has been located, older than any previously known site.  It was found using sensors on a plane that flew over the city and it is thought that it could have housed hundreds of thousands of people.  There is a large area of land next to this site that has not been investigated but could potentially.  Pretty incredible that we can still find things on our planet that we don’t know about.


While we are on the subject of finding things, I have also been reading about a hue ring shaped structure that has been found in space.  When I say huge, I’m talking incredibly massive, some 1.3 billion light years across.  Almost incomprehensible.  This apparently shouldn’t be able to exist according to our current understanding of space.  There’s still a lot we don’t know.


Speaking of what we don’t know, while things on earth and in space are incredible, I’d love to know where GBPUSD is going to go.  That’s not asking too much, surely!


Have a great weekend


-  12.30 ECBs Lane speaks

-  13.30 US PPI

-  15.00 Feds Kashkari speaks



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