Forex snapshot

GBP/USD traders will be focused on this morning’s UK inflation report, while the EUR/USD pair has once again seen weak inflation figures from the eurozone nations.

Pound and dollar currency
Source: Bloomberg

GBP/USD awaits UK data

Over the last 48 hours GBP/USD has edged slightly higher as traders wait for the latest UK inflation report and average earnings to be released. Both of these will be used by the Monetary Policy Committee when they next meet to decide how ready the UK is for the interest rate to be increased. At the moment the markets are indicating that earnings will drop by 0.1% inferring we are further away, rather than closer to a change. As ever, the phraseology that accompanies these announcements will be of equal importance as the markets scrabble to get a handle on the likely start date.

It looks less likely that the UK will be in a position to start increasing interest rates in 2014, but next week’s MPC minutes and the voting will confirm that one way or another.

EUR/USD could see new lows

Good economic data coming out of France or Germany is becoming an increasingly rare event. This morning’s worse-than-expected inflation figures point towards this trend continuing for some time, as the eurozone recovery continues to stumble. Tomorrow's GDP figures, out for both France and Germany, are expected to show French growth of just 0.1% while German figures are expected to shrink from 0.8% to -0.1% –– an almost 1% swing in the wrong direction.

At the moment the EUR/USD rate is hovering just above the November 2013 intraday lows of $1.3295. Although the EUR/USD pair is once again about to break below the oversold indicator on the relative strength index, the fundamentals would still point towards lower lows to come.

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