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Forex snapshot

The euro has been drifting lower as it ran out of steam attempting $1.27 overnight. The pound is back below the $1.61 mark and tomorrow’s inflation report will be a good indicator of the Bank of England's thinking.

Euro and dollar notes
Source: Bloomberg

Euro slips overnight

The euro is trading at $1.2658. Trading volumes and market volatility are expected to be low as the US is celebrating Columbus Day. It is also going to be quiet in terms of economic announcements from the eurozone. The German economy has been performing particularly poorly recently and when the powerhouse of Europe is struggling, you know there is a problem. Trades are looking ahead to the German ZEW report, which measures economic sentient, and analysts are expecting a reading of 0.2. This compares with September’s reading of 6.9.

I don’t foresee the euro breaking $1.27 in the near future and if traders continue to lose confidence in Germany ahead of the ZEW report the euro could drift to $1.2605.

EUR/USD chart

Sterling keeping an eye on CPI

The pound is trading at $1.6083. It has given up nearly all the gains it made on the back of the Federal Reserve minutes last week, when it was suggested the Fed are in no hurry to increase interest rates. Even though Mark Carney stated that interest rates would rise in the UK next year, traders are anticipating that the Fed will be the first to act. Tomorrow the UK will release the CPI report and analysts are expecting a decline from 1.5% in August, to $1.4% in September.

Soft inflation figures could drive the pound to $1.6020. Only an unexpected jump in inflation could force the pound up to $1.6160.

GBP/USD chart

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