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EUR/USD surges to six-month high after CPI data

 

Wednesday, December 14, 2022, 8.45am GMT

The news shaping the markets today

The US is close to finalising plans to send the Patriot missile defence system to Ukraine. The news sent the US dollar index higher this morning.


Japan’s core machinery orders surged 5.4% in October, beating market expectations of 2.6% growth, which sent the JPY/USD pair higher in forex trading this morning.


South Korea’s unemployment rate rose to 2.9% in November, from 2.8% in the previous month, exerting pressure on the KRW/USD forex pair.


New Zealand’s current account deficit widened to NZ$10.2 billion in the third quarter, from NZ$8.6 billion in the year-ago period, which sent the NZD/USD pair lower in forex trading this morning.


The American Petroleum Institute said that US crude stockpiles climbed by 7.819 million barrels in the week ended December 9, compared to a decline of 6.426 million barrels in the prior week. The news sent WTI crude oil prices lower this morning.

 

What’s happening: The euro gained against the US dollar on Tuesday following the release of the US Consumer Price Index.

What happened: The EUR/USD forex pair climbed to a six-month high after data showed that US consumer price inflation accelerated less-than-expected in November.

Traders await interest rate decisions from major central banks this week.

Why it matters: Data released on Tuesday showed the US annual inflation rate easing to 7.1% in November, the lowest level since December last year. The country’s inflation slowed for a fifth consecutive month, following a reading of 7.7% in October. The figure also came in below market expectations of 7.3%.

The country’s CPI rose only 0.1% versus the previous month, accelerating at the lowest pace in three months, and below market expectations of 0.3%. The energy price index declined by 1.6%, after surging 1.8% in the previous month amid lower prices for gasoline, while the cost of food rose by 0.5%.

The ECB is widely expected to raise interest rates by 50 bps on Thursday, despite the ongoing concerns around an economic slowdown and indications of inflation easing. The US Federal Reserve is projected to announce a rate hike of 50 bps on Wednesday, given the strong labour data released recently.

The Bank of England and the Swiss central bank are also likely to raise interest rates at their respective meetings.

The US dollar came under pressure as the release of inflation data reinforced prospects of the Fed slowing the pace of rate hikes. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 1.1% to 103.98 on Tuesday.

The EUR/USD forex pair climbed to 1.0666 during Tuesday’s session, reaching the highest level since June, but pared some gains and settled higher by around 0.9% at 1.0634.

What to watch: Investors will keep an eye on interest rate decisions from various central banks this week. Data on industrial production from the Eurozone will also be in focus. Industrial production in the Eurozone, which rose 0.9% in September, is expected to decline by 1.2% in October.

The markets today

Bitcoin will be in focus today after recording sharp gains on Tuesday

Context: Bitcoin maintained an upward trajectory on Tuesday and moved decidedly past the $17,000 resistance level.

Details: Cryptocurrency prices regained some ground on Tuesday, despite concerns around Binance’s stability after the collapse of FTX.

Most cryptocurrencies rose following the release of inflation data from the US, which showed a lower-than-expected rise in consumer prices last month.

The global cryptocurrency market cap jumped sharply to around $868 billion on Tuesday, gaining around 3%.

Bitcoin surpassed the $17,700 mark, with the world’s most valued crypto climbing by 3.8% to $17,806 in 24 hours.

Ethereum, the world’s second largest cryptocurrency, also recorded sharp gains, trading above the $1,300 level on Tuesday, after surging around 20% over the past two weeks.

What are expectations: Traders will keep an eye on the US Fed interest rate decision today. The release of major economic reports will also remain in focus.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.30%, 0.73% and 1.09%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0624 and 1.0628 Positive
EUR/JPY – 143.93 and 144.03 Positive
Gold – 1822.04 and 1823.09 Negative
Palladium  – 1931.37 and 1935.12 Negative
FTSE 100 – 7469.23 and 7533.48 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0630, -0.04%) Dow ($34,504, 0.34%) Brent ($80.56, -0.2%)
GBP/USD (1.2354, -0.09%) S&P500 ($4,070, 0.36%) WTI ($75.29, -0.1%)
USD/JPY (135.48, -0.08%) Nasdaq ($12,005, 0.39%) Gold ($1,823, -0.1%)

What else to watch today

India’s wholesale price inflation, UK’s inflation rate and retail price index, South Africa’s inflation rate and retail sales, Brazil’s IBC-Br economic activity index, US MBA mortgage applications, Canada’s manufacturing sales, US export prices, import prices, gasoline stocks change, crude oil stocks change and distillate stocks, Russia’s gross domestic product, as well as China’s foreign direct investment.

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