GBP/USD Regains 1.40 as USD Sold Off

After initially gaining on CPI data, the USD was sold off in the afternoon session and has remained weaker this morning.

Previous Day's Market Highlights

The dollar rallied yesterday after CPI came in higher than expected in January. Consumer prices rose 2.1% in January compared to a year prior, higher than the slowdown to 1.9% that had been forecast. Month on month, prices rose 0.5%. Higher inflation figures increase expectations for tighter monetary policy this year. The report was particularly important this month given recent stock and bond market volatility. Retail Sales disappointed.
 
This saw sterling-dollar drop towards 1.38 and euro-dollar fall below 1.23. Sterling-euro picked up a touch as it continued to trade around 1.12. The AussieNew Zealand, and Canadian dollars weakened on the USD strength.  
 
However, the USD strength proved only temporary, and the dollar was then sold off, more than reversing earlier gains. Euro-dollar rallied above 1.24 and sterling-dollar regained 1.40 to hit its highest levels since 8 Feb.
 
Overnight, the Aussie briefly dipped on employment data but overall continued regaining earlier lost ground against the pound.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1242 1.1512 1.1221 2.53%
GBP/USD 1.4053 1.4346 1.3763 4.06%
EUR/USD 1.2499 1.2538 1.2173 2.91%
GBP/AUD 1.7647 1.7861 1.7289 3.20%
GBP/NZD 1.8975 1.9466 1.8942 2.69%
GBP/CAD 1.7520 1.7646 1.7190 2.58%

Today's Market Highlights

The dollar remains softer this morning with euro-dollar having tested 1.25 and sterling-dollar so far holding above 1.40. First up today is the Eurozone’s trade balance (10:00 GMT), followed by ECB speakers this morning and US Producer Price Index figures, weekly Initial Jobless ClaimsCapacity Utilization, and Industrial Production this afternoon (13:30, 14:15 GMT). Mid-level releases may have limited impact and struggle to move rates significantly from current levels.
 
This evening, commodity currency traders will eye the Business NZ PMI and RBA Governor Lowe’s testimony before the House of Representatives’ Standing Committee on Economics.
 
The UK is back in focus tomorrow morning with the release of January Retail Sales, expected to pick up from last month’s decline but slow on an annualised basis from December.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR Trade Balance s.a. (Dec) €22.4B €22.5B
10:45 EUR ECB's Praet Speaks
12:00 EUR ECB's Lautenschlager Speaks
13:30 USD NY State Empire Manufacturing Index (Feb) 17.5 17.7
13:30 USD PPI YoY (Jan) 2.5% 2.6%
13:30 USD Initial Jobless Claims (2 Feb) 230K 221K
13:30 USD Philadelphia Fed Manufacturing Survey (Feb) 21.1 22.2
14:15 USD Capacity Utilization (Jan) 78.0% 77.9%
14:15 USD Industrial Production MoM (Jan) 0.2% 0.9%
15:00 USD NAHB Housing Market Index (Feb) 72 72
18:30 CAD BoC's Schembri Speaks
21:30 NZD Business NZ PMI (Jan) 51.2
22:30 AUD RBA Governor Lowe Speaks

Caxton