UK’s Sky-high Inflation – Euroarea’s Inflation Lower: Rate Hikes to Continue, Oil Price Drops, US Stocks keep steady

PREVIOUS TRADING DAY EVENTS – 19 April 2023

Announcements: 

At 9:00 the GBP experienced a great appreciation intraday as the inflation-related figures were released. It is clear that the U.K. has an inflation problem as this has been reported on Wednesday with the 10.1% increase in its headline Consumer Prices Index. This was lower than February’s 10.4% but above the 9.8% forecast by economists polled by Reuters and the 9.2% predicted by the BoE in February. A second significant upside surprise boosted the expectations of aggressive interest rate hikes from the BOE in May.

The U.K. is the only country in Western Europe with double-digit inflation in March. Its headline inflation rate is now the highest within Western Europe compared to the average of 6.9% in the Eurozone and 5.0% in the United States. Austria recorded a higher inflation rate than Britain in February.

“It’s now clear the UK has an inflation problem that is worse and more persistent than in Europe and the U.S.,” said Ed Monk, associate director of personal investing at asset manager Fidelity International.

“Price rises here are proving more difficult to neutralise and the Bank of England will almost certainly add at least one more quarter-point hike to borrowing costs.”

Source: https://www.reuters.com/world/uk/uk-inflation-rate-falls-101-march-ons-2023-04-19/#:~:text=Consumer%20price%20inflation%20(CPI)%20dropped,by%20the%20BoE%20in%20February.

The final CPI figures released yesterday were as expected. The euro area’s annual inflation rate was 6.9% in March 2023, down from 8.5% in February. Consumer inflation was lower primarily on a rapid fall in energy costs as natural gas prices kept declining after their surge from Russia’s invasion of Ukraine a year ago.

European Central Bank policymakers have pointed out several times recently that interest rates need to keep rising. The debate appears to be between a 25 basis point and a 50 basis point increase to be determined at the upcoming meeting on May 4. There is still a high chance that the ECB will go for a bigger increase.

Source: https://www.reuters.com/world/europe/core-euro-zone-inflation-edges-up-march-keeping-ecb-alert-2023-04-19/

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Summary Daily Moves – Winners vs Losers (19 April 2023)

USDCAD moved the most yesterday with just 0.54% gains followed by USDJPY with 0.52%.

This week so far the AUDCAD is on top of the winners with 0.95% change followed by AUDJPY with 0.91% change.

This month Silver is again leading with 4.87% change followed by EURJPY having 2.16% change so far.

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News Reports Monitor – Previous Trading Day (19 April 2023)

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1. Midnight – Night Session (Asian)

No significant news announcements and no important scheduled releases.

2. Morning – Day Session (European)

The U.K. CPI data was released early at 9:00. It was reported that the CPI change was 10.1% higher than expected but below the previous month’s figure. The GBP appreciated heavily.

The Final CPI figures for Europe were released at 12:00. All figures were as expected. Minimal impact on the EUR, with short depreciation.

General Verdict:

GBP appreciated due to the latest CPI figures. Major pairs experienced high volatility. EUR pairs moved roughly sideways during the final CPI figures.

Higher volatility than typical is explained by the USD movement as per the DXY chart.

FOREX MARKETS MONITOR

EURUSD (19.04.2023) Chart Summary

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Price Movement

The pair started to move downwards while approaching the European Markets opening, dropping a little more after the Final CPI figures were released and around noon it stopped. The euro area’s annual inflation rate was 6.9% in March 2023, lower than the 8.5% in February. Price reversed after that, crossing the 30-period MA and moving upwards until it eventually stopped again and retraced. The price path after that was sideways and less volatile.

EURGBP (19.04.2023) Chart Summary

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Price Movement

At 9:00, the reported yearly CPI figure for the U.K caused the GBP to appreciate heavily. EURGBP dropped at that time and soon retraced.

Trading Opportunities

No other major scheduled releases that day created room for the retracement opportunity after the CPI release. After dropping more than 30 pips, the pair showed resistance. By using the Fibonacci expansion tool we can see the 61.8% level at which the price might return. The pair indeed returned to the 50% level as depicted.

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EQUITY MARKETS MONITOR

NAS100 (NDX) 4-Day Chart Summary

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Price Movement

All U.S. benchmark indices have similar charts as NAS100 and continue their steady sideways path with high, but expected, volatility. This week the market had no important figure releases significantly affecting the USD or having any great impact on investment decisions. The only important fact to consider is that the cost of doing business is lower as Crude’s price is falling.

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COMMODITIES MARKETS MONITOR

USOIL (WTI) 4-Day Chart Summary

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Price Movement

The downward trend is now clear as Crude is moving below the 30-period MA and RSI is mostly below the 50 level. Crude’s price fell below 78.5. The recent reports concerning the U.S. economy implied fears of less oil demand. On the 19th of April, the U.S. Crude Oil Inventories figures showed -a 4.6M change for the previous week explaining the elevated price. However, this week oil prices fell as the latest economic report revealed the slowdown effects of monetary tightening.

XAUUSD (Gold) 4-Day Chart Summary

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Price Movement

Gold is falling lower and lower as the USD appreciates the last few days. Some important supports are broken, however, the path downward is not clear for Gold. Especially now that the markets are moving in consolidation phases and investors are growing fears of U.S. recession. Investment mode might turn off soon. Demand for less risky, safe-haven assets might get triggered again as the economy slows down more.

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News Reports Monitor – Today Trading Day (20 April 2023)

Server Time / Timezone EEST (UTC+03:00)

1. Midnight – Night Session (Asian)

At 1:45 the CPI figure for New Zealand was released. 1.2% was less than anticipated and less than the previous 1.4% figure, showing that inflation slowed way more than economists’ expectations and that the central bank might stop raising interest rates aggressively. At that time the NZD depreciated heavily. NZDUSD dropped more than 30 pips.

2. Morning – Day Session (European)

At 15:30 important figures for the U.S. are about to be released. Unemployment Claims and the Philly Fed Manufacturing Index. These figures are not expected to cause a shock for USD but they might create higher volatility to USD pairs than typical.

General Verdict:

The market has already been affected by scheduled releases such as the inflation-related figures for New Zealand having a great impact on the NZD.

More volatility is expected at 15:30 affecting USD.

Several speeches from FOMC members are taking place late during the American Session. Another speech from the BOC governor is also scheduled at 18:30. Traders should look for rapid price movements of GBP, CAD and USD pairs in one direction in order to catch the retracements that follow.

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