Inflation data to add more volatility this week

The pound has had a strong week where we started off around 1.4622 on the open up until now where we sit 300 pips higher at the open today at 1.4925. We started the week with the UK CPI which was as expected at 0.0%, but the climb has continued to push higher even with the General Election up and coming.

Today the average earnings index is released expected to be 1.8% same as last, this is becoming a key data release due to the rate hike guidance. The claimant count change is expected to weaken to -29.1k from -31k, and the unemployment rate expected to drop to 5.6% from 5.7%. All in all, this is an important morning for the UK and the pound, to be first tested on its gains this week.

The euro also had a rally this week after opening at 1.0600 and now at 1.0700, which briefly broke 1.0800 last night, mainly after the ECB kept rates at low levels and satisfied the markets that the QE will work, this pushed up above the 1.0700 where we have sat for the last couple of days. The data out is the final CPI y/y which is expected to be unchanged at -0.1%, and the final core CPI y/y is expected not to change at 0.6%.

The USD has taken the hit this week against all its peers. If we take a look at the US Dollar Index that started the week up at 99.66 to now 97.89, it correlates with the weakness across the board. This mainly has come in the form of poor data releases from the retail sales number, empire state manufacturing and unemployment claims, all coming in under expectations.
Today’s data will no doubt add the volatility of the USD with CPI and Core CPI expected to be released at 0.2% each the same as last.

The CAD has got most off guard this week with a huge fall from the open at 1.2574 to today’s open of 1.2180 a huge 394 pips, this come as the weak US and the strong oil correlation between the pair where oil has rallied this week.
Today’s data comes from the core CPI which is expected to be weaker at 0.3% from 0.6% and core retail sales expected at 0.7% from previous -1.8%.

EUR/USD
Supports 1.0650-1.0540-1.0450 | Resistance 1.0850-1.0930-1.1040

USD/CAD
Supports 1.2110-1.2030-1.1920 | Resistance 1.2300-1.2410-1.2490

GBP/USD
Supports 1.4840-1.4745-1.4680 | Resistance 1.5000-1.5070-1.5160