EUR/GBP falls despite surging UK CPI. S&P falls below key support.
EUR/GBP falls despite surging UK CPI
UK inflation surged to an almost 30-year high of 5.4% in December YoY, up from 5.1% in November and ahead of 5.2% forecast. This is also well ahead of the BoE target for inflation of 2%
The data comes after strong jobs data yesterday and could encourage the BoE to hike interest rates again in February.
BoE’s Andrew Bailey is due to speak later.
Speculation surrounding Boris Johnson’s future could limit any upside to the pound.
Meanwhile, the Euro is finding strength from a slightly weaker USD. German inflation data confirmed the preliminary reading of 5.3% YoY in December.
Where next for EUR/GBP?
EURGBP is on the rise after rebounding off support at 0.8323 for a second time this month. The pair has been consolidating since the start of the year, capped on the upside by 0.8366 and on the lower side by 0.8323.
The rebound off 0.8323 and the bullish cross over than appears to be forming on the MACD suggests there is more upside to come.
Buyers might look to wait for a move over 0.8366 before a test of resistance at 0.8379 yesterday’s high and 0.8420 the January 3 high.
Meanwhile sellers might wait for a move below 0.8323 to target 0.8270 the low from 2020
S&P falls below multi-month rising trendline
Rising concerns over the Fed moving harder and faster to rein in surging inflation dragged stocks sharply lower in the previous session.
Those fears are continuing to play out today with US treasury yields rising to fresh 2-year highs.
Earnings season is under way with Bank of America and Morgan Stanley in focus today after disappointment from Goldman Sachs yesterday.
Disappointing earnings could pressurize US indices further especially as US data is already hinting a slowing economic growth.
Where next for S&P 500?
The S&P dropped 1.8% yesterday and is heading for further losses today. The price fell out of the rising channel within which it has traded since mid-October and below the 100 sma which has been a strong support across the past 12 months. The RSI is in bearish territory suggesting threre could be more downside to come whilst it remains out of oversold territory.
Sellers will be look for a move towards 4493 the December low ahead of 4273 the October low.
Buyers will be looking for a move back into the rising channel and to the 50 sma at 4686 in order to negate the near term down trend. A move over 4750 could see buyers gain traction towards 4816 and fresh all-time highs.
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