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Forex snapshot

GBP/USD traders are likely to remain pensive today ahead of tomorrow’s UK inflation report, while the ZEW economic sentiment will be the focus for those watching EUR/USD.

Pound coins and US dollars
Source: Bloomberg

Cable traders await BoE report

Wednesday will see the release of the latest Bank of England inflation report and also an update of the average earnings in the UK. Both of these will be watched for clues as to how prepared the UK public and economy is for the onset of interest rate rises. Arguably, the average earnings figure will be a better gauge of how much room there is in monthly income to handle an increase in mortgage rates.

Looking at the chart GBP/USD remains in oversold territory while still holding above the 200-day moving average. As the 200-DMA coincides with the lows of early June around $1.67, we are likely to see support materialise around this level.

Spot FX GBP/USD chart

ZEW data misses expectations

The latest move in the Ukraine situation has seen Russia volunteer aid to Ukraine, while the west eyes this move suspiciously; as an opportunity to legitimise troops moving across the border, perhaps. Trust between the two parties is in thin supply and assumptions over ulterior motives remain prominent.

Today’s German ZEW economic sentiment figures come hot on the heels of a truly awful week of German data. Last week saw the country miss targets in both factory orders and industrial production, followed by a trade balance well below what had been expected. So it is no real surprise that this morning's figure came in at 8.6, significantly below the expected 17. Considering the disappointing economic data, German institutional analysts and investors will be forgiven for being a little less optimistic than they might previously have been.

EUR/USD remains in a bearish trend and, with inflation figures out later in the week, it looks unlikely to find enough good news to revert that sentiment. Lower lows look likely. 

Spot FX EUR/USD chart

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