Dollar Needs Retail Sales Comeback

GBP/USD hit a fresh 35 month high at the start of Asian trade before pulling back during the NY session. Inflation is in focus for the UK with January CPI data scheduled for release tomorrow. Inflation is rising across the globe and the UK will be no exception. The latest PMI reports confirmed that prices are rising in the manufacturing and services sector. Of all the major economies, the U.K.’s vaccine rollout has been the most successful which will pay dividends for growth in the months ahead. So while sterling may be down against the dollar, we expect it to outperform other major currencies.

All three of the commodity currencies gave up earlier gains to trade lower against the U.S. dollar. The Canadian dollar (CAD) fell the most on the back of lower prices and a stronger U.S. dollar. Like the U.K., inflation data is scheduled for release tomorrow. The price component of IVEY PMI surged signaling stronger price pressures in Canada. The Australian dollar (AUD) was hit by RBA minutes which showed the central bank looking to maintain significant monetary support for some time. A 3-day lockdown and weaker New Zealand service sector activity drove NZD/USD lower.

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