EUR/USD Current price: 1.0703 Market players are concerned the timing for rate cuts will be further extended. Stock markets struggle to revert recent losses, yields remain near fresh highs. EUR/USD consolidates at around 1.0700, has scope to extend the slump. The EUR/USD pair struggles around the 1.0700 mark on Wednesday as the US Dollar maintains the firm footing triggered by higher-than-anticipated United States (US) inflation. Financial markets turned risk-averse on Tuesday following the release of the US Consumer Price Index (CPI), which rose beyond expectations in January. The figures supported the Federal Reserve's (Fed) case of waiting longer before loosening the monetary policy through rate cuts. Stocks plummeted and government bond yields soared, resulting in the 10-year Treasury note offering as much as 4.31%, its higher since last December. Fears receded during Asian trading hours, with local stocks trading with a better tone and limiting USD gains. Government bond yields are also down ahead of Wall Street's opening, with the 10-year note currently offering 4.29%. Meanwhile, European Central Bank (ECB) officials commented on monetary policy. ECB Vice-President Luis de Guindos said on Wednesday that while the Eurozone inflation appears to be heading back to 2%, policymakers should not get ahead of themselves. "It will take some more time before we have the necessary information to confirm that inflation is sustainably returning to our 2% target," de Guindos noted. Also, Governing Council member Boris Vujcic added that the central bank seems to be getting the inflation fight "right," refraining from commenting on the timing for a policy shift. Data-wise, the EU published December Industrial Production, up 2.6% MoM against a 0.2% slide anticipated. The second estimate of the EU Gross Domestic Product (GDP) was confirmed at 0% QoQ and at 0.1% YoY as previously calculated. The US will not release relevant data, although several ECB and Fed speakers will be on the wires. EUR/USD short-term technical outlook The EUR/USD pair traded as low as 1.0694, a level that was last seen in mid-November. The daily chart shows it is marginally lower from its opening level and that it is developing below all its moving averages. The 20 Simple Moving Average (SMA) has already crossed below a flat 200 SMA, while the 100 SMA remains directionless at around 1.0790, reflecting the prevalent selling interest. On the other hand, technical indicators lack directional momentum and are currently consolidating near oversold readings. The bearish case dominates the near term. The 4-hour chart shows EUR/USD develops far below firmly bearish moving averages, with the 20 SMA providing resistance at around 1.0750. Finally, technical indicators have lost their downward strength but are far from suggesting a possible reversal, consolidating near their recent lows. Support levels: 1.0695 1.0650 1.0610 Resistance levels: 1.0750 1.0790 1.0840   (This story was corrected on February 14 at 13:15  GMT to say that "The figures supported the Federal Reserve's (Fed) case of waiting longer before loosening the monetary policy through rate cuts," previously reported as "tightening the monetary policy.")

EUR/USD declined sharply on broad US Dollar strength on Tuesday. The pair could extend its decline toward 1.0660 in case 1.0700 support fails. Markets favor a no change in the Fed policy rate in May after inflation data. EUR/USD came under heavy bearish pressure in the American session on Tuesday and touched its lowest level since mid-November at 1.0700. The pair stays in a consolidation phase slightly above this level early Wednesday but the technical outlook shows that the bearish bias remains intact. The US Dollar (USD) outperformed its rivals in the second half of the day on Tuesday and forced EUR/USD to decline sharply. Inflation in the US, as measured by the change in the Consumer Price Index, edged lower to 3.1% in January from 3.4% in December. This reading came in above the market expectation of 2.9%. Additionally, the Core CPI, which excludes volatile food and energy prices, rose 3.9% in the same period, matching December's increase and surpassing analysts' estimate of 3.7%. The probability of the Federal Reserve (Fed) leaving the policy rate unchanged at the next two policy meetings climbed to 60% from 40% after inflation data, according to the CME FedWatch Tool. There won't be any high-tier data releases featured in the US economic docket. Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic will be delivering speeches later in the day. In case Fed officials adopted a concerned tone regarding the latest inflation data, the USD could preserve its strength. On the other hand, the currency could correct lower if policymakers reiterate the need to see more data before deciding on the timing of the policy pivot. EUR/USD Technical Analysis EUR/USD trades in the lower half of the descending regression channel and the Relative Strength Index (RSI) indicator stays below 40, reflecting the bearish bias. On the downside, 1.0700 (psychological level, static level) aligns as immediate support before 1.0660 (static level from November, lower limit of the descending channel) and 1.0600 (psychological level). On the upside, first resistance is located at 1.0735 (mid-point of the descending channel) ahead of 1.0770 (50-period Simple Moving Average (SMA)) and 1.0800 (100-period SMA, psychological level, upper limit of the descending channel).

Yesterday's inflation data from the US didn't go smoothly down the market's throat. Instead, the stronger-than-expected set of inflation data dashed hopes of seeing the Federal Reserve (Fed) cut rates anytime in the first half of this year. Honestly, one can tell you if June or July would be a better time for the Fed to start cutting. The data will decide when the time comes. Yet the incoming data shows a surprising strength in the US economy. Atlanta Fed's GDP estimate, for example, prints a 3.4% growth for the Q1 – far from a number that would push the Fed to start cutting rates. As such, the 'blip' in yesterday's disinflation is more understandable than not given how strongly the US consumers spend. As a result, US yields jumped, equities sold off, the US dollar rallied against its major peers and gold slipped below $2000 per ounce. And the dollar's strength was further backed by softer-than-expected inflation data in the UK and Switzerland. 

GBP/USD trades in negative territory below 1.2600 early Wednesday. Annual CPI inflation in the UK held steady at 4% in January. Improving risk mood helps the pair limit its losses for now. After closing in negative territory on Tuesday, GBP/USD continued to push lower in the European session on Wednesday and touched its lowest level in over a week below 1.2550. The near-term technical outlook suggests that the pair has more room on the downside before turning technically overbought. January Consumer Price Index (CPI) readings from the US triggered a US Dollar rally in the American trading hours on Tuesday and caused GBP/USD to decline sharply. On a monthly basis, the CPI and the Core CPI, which excludes volatile food and energy prices, rose 0.3% and 0.4%, respectively. Both of these reading came in above analysts' estimates and provided a boost to the USD.  Early Wednesday, the UK's Office for National Statistics (ONS) reported that the annual CPI inflation and core CPI inflation held steady at 4% and 5.1%, respectively. Monthly CPI declined 0.6% in January, while the monthly Retail Price Index fell 0.3%. Although these prints are not weak enough for Bank of England policymakers to reconsider the timing of a policy pivot, they still make it difficult for Pound Sterling to stage a rebound. In the meantime, the UK's FTSE 100 Index opened higher on Wednesday and US stock index futures turned positive on the day after spending the Asian session moving sideways. In case risk flows start to dominate the action in financial markets in the second half of the day, the USD could lose some interest and help GBP/USD find a foot hold. Later in the day, BoE Governor Andrew Bailey will be testifying before the Lords Economic Affairs Committee. In case Bailey acknowledges the latest inflation data as welcoming news, GBP/USD could struggle to gain traction. On the other hand, Pound Sterling could find demand if Bailey adopts a cautious tone regarding a policy pivot, citing underlying strength in inflation despite January's encouraging prints.  GBP/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40, highlighting a buildup of bearish momentum. On the downside, 1.2520 (February 5 low) aligns as interim support before 1.2500 (psychological level, static level) and 1.2450 (Fibonacci 50% retracement of the latest uptrend). Looking north, 1.2600 (former support, static level) could be seen as first resistance before 1.2650 (Fibonacci 23.6% retracement) and 1.2700 (static level).

Overview: The underlying momentum in inflation is picking up in the US while it continues to move lower in the euro area. Inflation drivers paint a mixed picture with weak goods inflation and strong service inflation, but inflation is likely to trend lower in 2024. Freight rates have picked up due to the tensions in the Red Sea, but not to the extent that we would expect another significant pick-up in core goods inflation. Oil prices have stabilized, and gas prices have continued trending lower. Tight labour markets continue to support upside risks to core inflation going forward and points to a cautious approach in central banks' easing cycles. Inflation expectations: Both market and survey-based inflation expectations have declined further over the past month amid some volatility in the US. Market based inflation expectations are now almost consistent with the 2% inflation targets. US: January CPI came out above expectations with a core inflation print of 0.39% m/m (consensus 0.3% m/m) while headline inflation was up 0.3% m/m (consensus 0.2% m/m). The surprise was driven by a broad-based increase of service prices with the 'super core' (services ex. shelter) rising 0.85% m/m putting it on a rising trend. On the other hand, core goods prices were low at -0.3% m/m. The sharp monthly rise in the 'super core' signals some one-off effects from companies adjusting only prices in January. But overall, the CPI report points to risks of more persistent underlying inflation in the US and lowers the probability of a cut already next month. Euro: Headline inflation printed 2.8% y/y (-0.4% m/m) in January, which was broadly as expected while core inflation increased 3.3% y/y (prior: 3.4%). Food and service inflation drove the print while goods inflation continued to fall significantly. There were a lot of one-offs affecting inflation from different government measures that ended as well as the fact that companies tend to adjust prices in January. While these factors were visible in core services and energy inflation it was not to a large extent. Hence, the current momentum in core inflation stopped falling but it is likely to turn lower as one-offs fade. Overall, the January print should not have changed ECB's assessment. China: January CPI fell to -0.8% y/y from -0.3% y/y in December. CPI is still held down by a big decline in food prices, but core CPI also fell from 0.6% y/y to 0.4% y/y. Download The Full Global Inflation Watch

Gold price licks wounds as US inflation data pares Fed easing expectations.   US Dollar pauses before the next push higher; focus shifts to Fedspeak.  Gold price appears 'sell the bounce' trade amid bearish technicals. Gold price is flirting with the lowest level in two months near $1,990 early Wednesday, consolidating the previous day's steep sell-off. The US Dollar (USD) rally has taken a breather alongside the US Treasury bond yields, allowing Gold price a temporary relief.   Hot US CPI data reinforces Gold sellers Having briefly extended Tuesday's slide in Asian trading on Wednesday, Gold price is nursing losses, as markets resort to profit-taking on the US Dollar upsurge that followed the hotter-than-expected US Consumer Price Index (CPI) inflation data. The annual CPI inflation in the US fell to 3.1% in January following a brief increase to 3.4% in December but outpaced forecasts of 2.9%. The US CPI edged up 0.3% MoM, the most in four months, and above forecasts of 0.2%. Further, annual core CPI rose 3.9%, compared to expectations of a 3.7% growth. The monthly inflation rate edged up to 0.4%. Hot US inflation report reinforced the US Federal Reserve's (Fed) pushback against early and aggressive interest rate cut expectations, triggering a fresh rally in the US Treasury bond yields and the US Dollar. The benchmark 10-year US Treasury bond yields hit fresh three-month highs of 4.33%, where it now wavers. The US Dollar Index tested 105.00, a new three-month top. Asian traders hit their desks early Wednesday and reacted to the US CPI data, keeping Gold price under pressure. Markets now price out a March Fed rate cut while chances of a May easing are seen around 65%. Looking ahead, the US Dollar could resume its uptrend if risk aversion intensifies and the Fed policymakers back the hawkish interest rate outlook. Global markets are in a downward spiral following the hot US CPI data. In such a scenario, Gold price is likely to continue its bearish momentum. A potential rebound in Gold price, however, cannot be ruled out should investors take profits off the table. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price managed to close Tuesday above the 100-day Simple Moving Average (SMA) at $1,993. However, it opened Wednesday below that level, keeping sellers hopeful.   The 14-day Relative Strength Index (RSI) is trading well below the 50 level, suggesting that there is more pain in store for Gold buyers. Meanwhile, the 21-day and 50-day SMAs Bear Cross, confirmed last week, also remains in play.  Therefore, any corrective upside in Gold price could be seen as a good selling opportunity for Gold sellers in the near term. Key support levels are now seen at the December 13 low of $1,973 and the horizontal 200-day SMA at $1,966. A sustained move below the latter will put the $1,950 psychological level at risk. On the contrary, if Gold price manages to recapture the 100-day SMA support-turned-resistance at $1,993 on a daily closing basis, a fresh recovery toward the 21-day SMA of $2,024 cannot be ruled out. Gold price needs to find a strong foothold above the $2,000 barrier once again, at first.