STERLING SPIKES TO 21-MONTH HIGH AS UK INFLATION SOARS
The Sterling rose to the highest level in more than 21 months against the euro after the strong economic data from the UK. On Tuesday, numbers by the Office of National Statistics (ONS) revealed that the country’s employers added more jobs in the three months to September. Also, the unemployment rate fell to the lowest level since the pandemic started while the number of people filing for jobless claims has dropped. In a report today, the ONS said that the country’s inflation jumped to the highest level in more than a decade. As such, there is a likelihood that the Bank of England will adopt a relatively hawkish policy.
The euro declined to a multi-month low against the US dollar after the latest Eurozone inflation numbers. According to Eurostat, the bloc’s inflation rose by 4.1% on a year-on-year basis in October. Core inflation which excludes the volatile food and energy prices rose to 2.1%. This trend will likely continue considering that gas price has not relented. The situation worsened after Germany announced that it was blocking the Nord Stream 2 pipeline. This happened at a time when Gazprom has been limiting the volume of gas it pumps to the European Union.
The Japanese yen slumped to the lowest level in months after the relatively weak Japanese trade and machinery order numbers. In October, Japan’s exports rose by just 9.4%, which was lower than the previous 13%. At the same time, imports declined to 28.6% from the previous 38.6%. As a result, the country’s trade deficit narrowed to about 64 billion yen. Further data showed that the core machinery orders rose by 12%. Therefore, there is a likelihood that the currency will keep falling since the Bank of Japan is expected to continue its dovish stance.
USDJPY
The USDJPY has been in a relentless rally in the past few weeks. This trend has seen it rally from a low of 109.34 in September to 114.85 this week. The pair also rose above the key level at 114.70, which was the highest level this year. It has also formed what looks like a cup and handle pattern. Therefore, the pair will likely maintain a bullish trend in the coming days.
EURGBP
The EURGBP pair has been in a strong bearish trend in the past few days. It managed to move below the key support level at 0.8401, which was the lowest level this year. The pair then went on to crash to the lowest level in 21 months. As a result, the pair is along the lower side of the Bollinger Bands. It has also formed an inverted cup and handle pattern. Therefore, the pair will likely keep falling as bears target the key support at 0.8350.
EURUSD
The EURUSD pair crashed below the lower side of the descending channel and reached a low of 1.1261. This was the lowest level since June 2020. It then made a small recovery to the current level at 1.1310. The pair has also moved slightly below the purple trendline that connects the lowest levels a few weeks ago. It is also below the 25-day moving average. Therefore, the pair will likely have a relief rally later today.
