Investors are sure that the Fed will revise the timing of the key interest rate high amid surging inflation. Against this background, the US dollar continues gaining in value against almost all the currencies. However, there are currencies that still attract investors’ attention. For more details, watch our new video review on InstaForex TV channel.
Today, the UK published its annual inflation report. The indicator accelerated to 4.2% from 3.1%, thus boosting the pound sterling. The global inflation growth threatens economic recovery and may cause a new wave of recession. Notably, the Bank of England has already announced its intention to tighten monetary policy in order to curb surging inflation. A sharp rise in the indicator may force the regulator to raise the key interest rate earlier than planned. Such a possibility has pushed the British pound higher.
In the eurozone, the situation is a bit different. The final inflation report is likely to meet the preliminary estimate that unveiled a faster increase to 4.1% from 3.4%. Meanwhile, the ECB has confirmed that the benchmark rate will be raised at least in 2023. In other words, the ECB is not even planning to cap the inflation growth, thus threatening European economic expansion. On the other hand, today’s report will hardly influence the market situation since traders have already priced in the preliminary estimate.
Today, during the US trade, the greenback is likely to climb amid positive macroeconomic data. In particular, the US housing starts may advance by 2.3%, while building permits may increase by 4.5%. However, today’s reports are not so important as retail sales or industrial production. That is why the US dollar is expected to show a modest rise, whereas the pound sterling may simply ignore the data. The construction sector figures may just stop the growth in the British currency. What in your opinion may affect the euro and the pound sterling? Leave your answers in the comment section and we will discuss them next time.
Let us take a look at the trading charts.
The euro lost more than 300 pips in just 5 trading days. It is a sharp change in a small period of time that reflects oversold conditions.
At the beginning of the Asian trade, speculators of the US dollar became active, thus pushing the euro/dollar pair to 1.1263. As a result, the volume of short positions dropped and the price slid to 1.1317. It is quite possible that the market sentiment will remain bearish. If the price fixes below 1.1300, speculators may push it even lower. (*) The alternative scenario will become possible, if correction replaces the current decline.
Meanwhile, the pound/dollar pair is climbing from the intermediate support level of 1.3350. Notably, since the beginning of the week, the pair has been hovering within the range of 1.3400-1.3450. Nevertheless, the main trend remains bearish in the mid term. In other words, the current price change is just a short-lived phenomenon. The pound sterling is in great demand, but market participants failed to prolong the upward correction. If the price consolidates above 1.3475 at least on the one-hour chart, the volume of long positions is likely to rise. Otherwise, the price may slide to 1.3400.

00:00 Rally of the dollar and the interest of traders
00:27 UK Annual Inflation Rate
01:07 Eurozone Annual Inflation Rate
01:50 American macroeconomic statistics as a reason for the dollar's growth
02:39 EUR / USD
03:31 GBP / USD


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