EUR/USD, USD/JPY: ‘Conservative’ Targets At 1.30 & 100 As USD Regime Change Underway – ING

Both the euro and the yen had roller-coaster weeks against the US dollar amid rising market volatility. What’s next? Here is their view, courtesy of eFXnews: ING Research discusses the USD outlook by looking at the divergence in US yields and the USD performance, and notes the following key points. ” i) this year’s rise […]

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USD/JPY: To 100 or back to 110? Two opinions

USD/JPY fell to a 15-month low and is already trading at the 105 handle. The yen did not suffer from the expected reappointment of Haruhiko Kuroda to lead the BOJ. What’s next? Here are two opinions: Here is their view, courtesy of eFXnews: USD/JPY: Still A Sell On Rallies Targeting 2016 Lows Around 100 – […]

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Is the US economy overheating? – Live coverage of the Inflation Report

The US releases its all-important and highly-anticipated inflation report. The first publication for 2018 has risen in importance after the recent stock market crash. Higher wages sparked a sell-off. And now the question remains: is inflation also moving higher? Expectations stand at unchanged on the most fundamental piece of data: core CPI, which stands at […]

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USD/JPY: After falling to a 15-month low, what’s next?

Dollar/yen fell to a new low below 107, hitting a low of 106.84 before bouncing. This is the lowest level since late 2016. What’s next? Here is their view, courtesy of eFXnews: USD/JPY: Where To Target After 108 Break?; USD/CAD: Still Looking To Buy Dips – TD TD Research discusses USD/JPY outlook in light of its […]

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The Pound Rises as Inflation Concerns Linger

Today, the UK’s Office of National Statistics) released the inflation data for January. The data showed that inflation was at 3%, above the analysts’ estimates of 2.9%.

The data was released less than a week after the Bank of England (BOE) held its first meeting of the year. In this meeting, the committee guided that they would introduce rate hikes faster than expected. Reading between the lines, traders found this language to be similar to what they had used in their September meeting. After the meeting, they made their first rate hike in their October meeting.

After the data was released, the pound rose 0.65% above the dollar, 1.44% above the Chinese Yuan, and 0.24% above the euro.

The 3% inflation rate is near the 6-year high which the country achieved in November last year. Following that inflation, the BoE governor was forced to write a letter to the treasury minister to explain about the situation.

In the letter released last week, the governor attributed the rise in price to the high energy prices which led to higher airfares. He also blamed the high inflation to the devaluation of the pound following the Brexit vote.

The surprise 3% read today puts the Bank of England at a tough spot. This is because, they must move to protect customers from the effects of high inflation at a time when wages are not growing as expected. In the latest reading, the average wage increases rose by just 2.4%, which is lower than the rate of inflation.

As a response, the bank will need to raise interest rates. Doing this will help, stabilize the inflation rate and possibly bring it to the target of 2%. However, doing so will also be a challenge to people who have loans and mortgages, who will struggle to pay the money back.

This is not the first time the inflation rate has been above the target. In fact, it has been above the 2% level for the past 12 months, which was attributed to the impact of Brexit. This time, it was led by the footwear, clothing, and recreational services. In addition, house prices continued to rise, especially in the rural areas. In London, the price stagnated. The chart below shows the house prices for different parts of the country.

The annual producer price inflation dropped to 4.7% down from 5.4% in December. This is an indicator that the impacts of Brexit might be fading.

Still, the risks of a Brexit have not disappeared. Just a week ago, the chief EU regulator talked tough about the terms the UK expects from the EU. At the same time, some organizations, led by the one chaired by George Soros are planning another referendum. All this is happening while the future of the UK prime minister is at stake.

After the data was released, UK’s stocks gained with the FTSE rising by 100 points. The gain was led by the mining companies. With no major news, the rise was attributed to the weaker dollar.

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GBP/USD: The 2 Key Drivers For GBP Performance Are Closely Linked? What’s Next? – BTMU

The pound got a temporary lift from the BOE’s hawkishness but remains vulnerable. What’s next? Here is their view, courtesy of eFXnews: BTMU Research discusses GBP/USD outlook and explains how the 2 key drivers of pound performance (Brexit & BoE ) are closely linked.  “The BoE has clearly laid out that their outlook for the UK economy […]

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