November 15, 2023 09:56 GMT
CPI Rally Hits Reverse, GBP Softer as Inflation Misses
- Markets are in fade mode after yesterday's sharp US CPI-inspired EUR/USD rally. The pair is lower, putting the EUR softer against all others in G10, but is still holding ~150 pips of the Tuesday recovery toward 1.0900. This morning's fade off Tuesday's 1.0887 has helped alleviate pressure on the RSI, which was approaching technically overbought conditions through this close. This may allow for a short period of consolidation in the pair before any recovery resumes. 1.0862 and 1.0960 mark the key levels of resistance ahead.
- NZD is the best performer across G10, extending Tuesday's post CPI outperformance and putting NZD/USD comfortably north of the 100-dma. Strength in the pair faces its next test at 0.6056, the mid-October high and bull trigger. A solid rally in Chinese and Hong Kong equities (Hang Seng Index closed higher by 3.9%) has helped contribute to the risk-on backdrop, with more solid industrial metals prices also contributing.
- Lastly, GBP is seen soft on the back of a lower-than-expected CPI print for October. Not only did the headline miss consensus by 0.1ppts. but services inflation was more muted, allowing for markets to solidify expectations of rate cuts from the Bank of England by the midpoint of 2024. This has dragged GBP/JPY off yesterday's cycle high, making 187.01 the level to watch.
- US PPI data takes focus later today, with market looking for any further disinflationary signals after Tuesday's softer-than-expected CPI print. Retail sales for October also cross, with markets expecting the headline to drop to -0.3%, from +0.7% prior. Fed's Barr, Barkin and Jefferson are set to speak, although none appear to be addressing monetary policy directly. BoE's Haskel makes an appearance after the UK market close.
- Further out, the meeting in San Francisco between US President Biden and his Chinese counterpart Xi is set to culminate in a press conference at 2315GMT/1815ET.