UK Inflation Data Supports Sterling

GBP: Services disinflation still too slow

The UK's Office for National Statistics reported early this morning that annual inflation, as measured by the change in the Consumer Price Index (CPI), edged lower to 3.2% in March from 3.4% in February. Additionally, core CPI rose 4.2% in the same period. Both of these readings came in above analysts' estimates and helped Sterling gather strength. After spending the Asian session in a tight channel slightly above $1.2400, GBP/USD gained traction and rose toward $1.2450. Against the Euro, GBP/EUR rallied around 0.3%, but has since given up half those gains to trade around €1.1710.

No Major Data. Speaker 17.00: BoE Gov Bailey.

Euro stems losses versus Dollar

EUR/USD is about to test the $1.0600 psychological level, but it seems unlikely this is will be a strong technical support. Instead, the next big supports may be at $1.0500 and the $1.0450 October low. Crucially, the lack of market moving data releases and the strong Dollar means a move to the $1.0500 area in the near terms is a rather tangible risk. The divergence between the Fed and the ECB narratives was underscored by Powell and Lagarde yesterday, with the former signaling tightening for longer and the latter confirming the ECB is ready to cut rates soon if inflation keeps easing.

No major data: Speaker 19.00: ECB President Lagarde.

US Dollar consolidates before Fedspeak

The Dollar was broadly steady in this mornings trading session, keeping the Yen rooted near 34-year lows after comments from Federal Reserve officials, including Chair Jerome Powell, suggested U.S. interest rates are likely to stay higher for longer. Top U.S. central bank officials including Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer, dashing investor hopes for significant easing this year. Those hawkish Fed comments and the cautious market stance helped the USD find demand in the American session and the USD Index closed the fifth consecutive day in positive territory yesterday.

No Major Data. Speaker 22.30: FOMC Member Mester.