UK CPI FALLS TO A YEAR LOW AS EU CPI SOFTENS
After an impressive gaining streak, the pound fell today following the release of inflation data. Data from the Office of National Statistics (ONS) showed that consumer prices fell to 2.5%, which was the lowest level in one year. The decline in prices was caused mostly by apparel and shoes which rose at a slower rate than they did a year ago. The MoM CPI rose by 0.1%, down from February’s 0.4%. Core CPI that excludes volatile products rose by 2.3% compared to last month’s 24%. The soft inflation data removed the urgency for the BOE to increase interest rates in the coming meetings.
In the EU, Eurostat released the CPI data that missed analysts’ forecasts. The data showed that the CPI grew at an annualized rate of 1.3%, down from last month’s 1.4%. The biggest contributor to the inflation was the services sector followed by the food and beverage sector. In addition, the data released showed that the production in the housing sector was down by 0.5% while the industrial production declined by 0.8%. These numbers mean that the ECB supportive policy could continue for longer.
Yesterday, Japanese Prime Minister Shinzo Abe met with Donald Trump at his estate in Florida. The meeting gave the embattled PM a chance to address various issues on trade and North Korea. He pushed the Trump administration to reconsider joining the Trans Pacific Partnership (TPP), a deal crafted by the Obama administration to contain China. After the meeting, Trump tweeted his main issues with the deal by comparing it with the other multilateral deals like NAFTA and WTO.
The EUR/USD pair was little moved today following the release of the CPI data. The pair is now trading at the 1.2370 level which is slightly lower than yesterday’s high of 1.2412. Using the hourly chart shown below, the pair is on an upward trend but has struggled to move past the three-year high of 1.2560. There is a likelihood that the pair will continue the upward trend and possibly test the 1.2412 high.
After weeks of rising, the cable reversed following the ONS release of soft consumer price data. The data removed the urgency for Mark Carney and other officials to raise interest rates in the May meeting. As a result, the pair retraced to the 50% Fibonacci Retracement level of 1.4170. The pair could reverse the downward trend here but if it continues to move lower, it could test the 1.4120, which is the 61.8 retracement level.
The Japanese Yen fell slightly after Abe’s meeting with Donald Trump and his reversal about TPP. It is currently trading at 107.20 while touching the lower line of the Bollinger Bands. The MACD indicator shows that there is a likelihood that the pair could continue moving lower to potentially test the 106.85 level.