All Eyes on UK CPI Print after US Print Yesterday.

GBP Update:
UK inflation, both core and headline measures, showed a decline in October, surpassing estimates. Notably, decreases in food and energy prices contributed to the improvement, with goods inflation dropping from 6.2% to 2.9% year-over-year. Services inflation also decreased, albeit more modestly, from 6.9% to 6.6%. The substantial 12-month decline in headline inflation is likely to be celebrated by the UK government, aligning with Rishi Sunak’s promise to halve inflation by the end of 2023. While this development suggests that the Bank of England might pause interest rate hikes, concerns linger as inflation, average earnings, and services inflation remain elevated.

USD Update:
U.S. Treasury yields saw a sharp decline following weaker-than-expected U.S. consumer price index data, reducing the likelihood of further central bank tightening. This weakened the case for maintaining elevated interest rates, causing a significant drop in the DXY index, its worst daily performance since November 2022. The euro and British pound surged to multi-week highs against the dollar, while gold prices consolidated above the 200-day moving average. Simultaneously, the Nasdaq 100 approached its 2023 peak.

EUR Update:
EUR/USD experienced a notable surge above 1.08, surpassing Fibonacci resistance and the 200-day moving average. With positive momentum and a shift in sentiment, the pair may continue its upward trajectory with a potential target at 1.0960, the 61.8% Fibonacci retracement of the July/October selloff. In case of a reversal, the first technical support is around 1.0840, followed by the psychological 1.0800 handle. Further weakness increases the risk of revisiting the 1.0650 area.

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