USD and GBP ahead of UK’s November CPI and FOMC

The FOMC meeting and UK’s November CPI figures move the USD and the GBP today. Let’s see what lies ahead.

GBP Moved by November CPI

According to ING analysts, the UK’s inflation has taken over the GBP’s depreciation, and both core and headline inflation are expected to start following a downtrend through the spring. However, one question yet needs to be answered – Will domestically-generated inflation accelerate next year or not? Sluggish economic growth in the UK and the uncertainty surrounding the political arena might limit the corporate sector’s ability to increase prices and wages, ING experts suggest.

Ahead of the big CPI release for November and tracking the fire of the Brexit talks, GBPUSD started with a daily open at 1.33470 on Tuesday and is hovering above 1.3338. The cable seems to have gained a little bit of pace today on news that the UK government will not pay the agreed divorce bill unless a trade deal is reached by March 2019, The Telegraph reports quoting secretary David Davis. This tightened the collar around Sterling’s neck, putting it under selling pressure on Monday.

However, a somewhat softer tone in the buck prompted the up-move of GBPUSD. At the same time, traders seem to have felt urged to soften their bearish inclinations ahead of this week’s releases.

USD in the Spotlight Ahead of FOMC

On the other side of the pond, USD hogs the limelight of the FOMC meeting, another key event scheduled this week, which will move the markets. Ahead of the event, markets appear to have already priced in a 25-basis rate hike, which puts the USD under pressure and at risk of a downtrend following the increase in rates.

The recovery stance that the US dollar index has got into since November 27 from 92.50 lows seems to have lost steam at 94.00 levels, and the range-bound action in treasury yields accounts for this move.

As a consequence, EURUSD remains in the negative area around 1.777 levels following a daily open at 1.7760.

USDJPY started the day with a daily open at 113.546 and is revolving around a timid 113.386 handle, as the greenback sheds pips against a stronger Yen bolstered by a predominantly cautious sentiment around equity markets.