The EURUSD pair slid 0.99% to 1.1478 on Wednesday, November 10. Price action collapsed during the North American session after the October CPI reading acceleration came in stronger than expected.
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In October, headline inflation shot up to 6.2% – a record high since November 1990. Compared to September, price growth accelerated by 0.8%, while core inflation, which does not factor in volatile energy and food prices, accelerated to 4.6%, also tracking a 30-year high. US inflation is expected to continue to accelerate over the coming months on the back of housing, utilities, energy and auto prices.
Experts attribute dollar strength to an increase in the spread between US and German government bonds, as well as a revised expectations about Fed rate hikes. Given the magnitude of inflation growth, the regulator may well raise rates ahead of its own guidance.
Today’s macro agenda (GMT+3)
- 12:00 monthly economy bulletin; 13:00 ECB economic forecasts
- 15:00 OPEC monthly report
- 15:15 ECB chief economist Philip Lane speech
- Statutory holidays in US and Canada
Current outlook
The dollar and gold tapped into galloping inflation stateside. Most major currencies have been trading in the red. Sterling is trading in the green, but given that the situation looks ambiguous, selling could resume with renewed impetus.
The UK plans to abandon parts of the agreement that govern the free movement of goods between Northern Ireland and the UK. The EU has warned about taking retaliatory measures that could eventually include breaking the free trade agreement signed at the end of 2020. How Britain will behave is unknown. Disappointing UK GDP data limited sterling's upside potential.
The economic calendar is an empty slate today. Market participants continue to digest yesterday’s US inflation data. The market is pricing in an earlier liftoff of the federal funds rate.
In other news, Germany, the number of cases of coronavirus spiked higher, exceeding 50,000 over the past 24 hours, a record since the onset of the pandemic. The tense Coronavirus situation will put pressure on the euro, since Germany is likely to start imposing lockdowns again.
Technical analysis
The euro sank to 1.1464. Antipodeans are in decline for the third consecutive day. Their weekly losses stand at 1.18% and 1.03%, respectively. For the euro, 1.13 is on the radar (in terms of volume profile). On the hourly TF, the next support will be the 1.1435-1.1450 zone. The UST10 yield has widened to 1.57% and continues to climb.
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