- The US dollar ticked a little lower yesterday as recent data continues to suggest that the Federal Reserve is likely done with rate increases in the current hiking cycle. The dollar index dipped, taking the weekly drop to around 1.3% after yesterday’s weekly initial claims report showed that applications for unemployment benefits rose to the highest level in almost two years. The print comes after compounding recent data suggesting slowing growth momentum and an ongoing disinflationary trend in the US economy. The FOMC’s next policy announcement comes on December 13, and a further pause is fully priced in, as markets continue to ponder just when the first interest rate cut will be announced.
- EURUSD attempted another break to the upside yesterday, trading within touching distance of 1.09 before running in to offers to once again fall to the mid 1.08’s where the pivotal 1.0805 level acts as initial support. Later this morning we look forward to the release of the final reading of euro area CPI for October which is expected to come in at 2.9%. A drop from the previous 4.3% is a step in the right direction with a drop in energy taking most of the credit for the fall. The print should confirm that underlying price pressures are continuing to ease, adding to confidence that the ECB will keep rates unchanged at the final policy meeting of the year on December 14.
- The pound has slipped again this morning after UK Retail Sales fell unexpectedly in October, providing further evidence that the BoE’s interest rate hikes aimed at stemming inflation are also tempering economic activity. The volume of goods sold online and instore dropped 0.3%, following a downwardly revised 1.1% decline in September. It is the latest indication that the 14 consecutive rate hikes from the MPC have come to an end and the next move in rates will likely be down. 1.2350 is the next level of support in cable, with a breach opening the way to another move lower to 1.2270.
