The EUR/USD pair remains steady amid a cautious market sentiment as investors await the release of the U.S. Consumer Price Index (CPI) inflation data. This anticipated release is expected to provide further insights into the economic outlook. Meanwhile, the Pound Sterling has shown resilience despite an unexpected decline in UK inflation figures, navigating through the pressures of the market. Both currency pairs are experiencing fluctuations as they react to varying inflation data and economic indicators.
In European trading hours on Wednesday, the EUR/USD pair held its range near 1.0300. This stability was maintained despite the subdued U.S. Dollar, which provided some support against dovish comments from the European Central Bank (ECB). The core CPI inflation, excluding volatile food and energy categories, is projected to remain steady at 3.3% from the previous year.
The GBP/USD pair, known as Cable, experienced fresh pressure on Tuesday. It attempted to recover from Monday’s significant downside rejection but faced repeated resistance around the 1.2250 zone. On Wednesday, it struggled to capitalize on its modest recovery from the 1.2100 mark, which was the lowest level since November 2023. The pair did manage to extend its recovery above 1.2200 during the European session.
UK inflation data revealed a surprising cooldown, as the December UK CPI inflation fell to 2.5% year-on-year, contrary to the 2.7% expected. This softer-than-expected consumer inflation data triggered an intraday descent for the GBP/USD pair, though the subdued U.S. Dollar aided in rebounding spot prices slightly from mid-1.2100s.
In the United States, inflation as measured by the CPI is expected to rise by 2.9% annually in November, a slight increase from the previous 2.7%. The annual core CPI, which excludes volatile food and energy items, rose by 3.2% during the reported month compared to a 3.5% increase in November and a 3.4% anticipated rise. These figures underscore a steady inflation trajectory, which continues to influence market dynamics.
Amid these developments, gold prices have recovered from initial weekly losses, edging higher for the second consecutive day. Trading in the $2,680s on Wednesday followed a softer-than-expected Producer Price Index (PPI) release in the United States, which led to a significant easing in U.S. yields.
Market participants are now shifting their focus to the upcoming U.S. CPI data release for further indications of economic trends and potential policy adjustments. The outcome of this data will be crucial in influencing future market movements and investor sentiment.