GBPUSD bears the burden of disappointing UK inflation

Market sentiment improves on early Wednesday as receding inflation numbers from major economies push back rate hike fears while headlines from China suggest more stimulus to defend the world’s second-largest economy’s recovery. Adding strength to the risk-on mood can be the headline from the US banks suggesting more profits due to the higher interest rates.

Even so, the US Dollar extends the previous day’s rebound from the 15-month low while ignoring downbeat yields. That said, the USDJPY also pays little heed to softer bond coupons while refreshing weekly top amid firmer sentiment and dovish concerns about the BoJ.

Elsewhere, GBPUSD slumps the most among the G10 currency pairs as the UK CPI drops more than expected and challenges hawkish BoE concerns. Further, AUDUSD and NZDUSD also fail to cheer the upbeat sentiment while prices of Gold edge higher after refreshing monthly peak. Additionally, the crude oil prints mild losses amid demand concerns and firmer US Dollar whereas EURUSD, USDCAD and USDCHF appear the least moved pairs among the majors.

Talking about the cryptos, BTCUSD and ETHUSD remain firmer as big players show confidence in Bitcoin and Ethereum while Meta and Microsoft brace for new measures to fuel inflows of the unconventional market.

Following are the latest moves of the key assets:

• Brent oil consolidates the biggest daily gains in a week around $79.50, down 0.40% intraday at the latest.
• Gold price seesaws at the highest level in six weeks, making rounds to $1,980 by the press time.
• USD Index defends the previous day’s recovery from the lowest levels since April 2022 near 100.00 of late.
• Wall Street benchmarks closed with notable gains and refreshed yearly tops while stocks in the Asia-Pacific zone edged higher. With this, equities in Europe and UK print mild gains by the press time.
• BTCUSD and ETHUSD print minor gains during the first positive day in five to around $30,000 and $1,900 as we write.

US Dollar recovers despite risk-on mood, GBP nosedives on UK CPI

While the risk-on mood should have ideally joined the dovish Fed concerns to weigh on the US Dollar, Tuesday’s upbeat US Retail Sales flagged expectations that the US central bank may keep the rates hike even if it appears set to pause the rate hikes in 2023, which in favors the greenback’s corrective bounce off the multi-month low.

On the other hand, the UK’s downbeat CPI raises doubts about the BoE’s capacity to lift the rates further, especially amid fears of British recession and the same drowns the GBPUSD.

That said, the Gold juggles between an upbeat USD and the risk-on mood at the highest levels since early June whereas crude oil bears the burden of firmer greenback and fears of higher supplies.

It should be noted that the fresh bout of optimism in the crypto market, backed by Cathie Woods, allows the BTCUSD and ETHUSD to ignore upbeat USD and snap a five-day losing streak.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Mid-tier data, risk catalysts in focus

Having witnessed the initial market reaction to this week’s top-tier data, namely the US Retail Sales and UK inflation, housing market numbers from the US and final prints of Eurozone inflation clues may entertain the momentum traders. That said, the risk-on mood and the US Dollar rebound can keep the commodities and Antipodeans on the back foot while the GBPUSD needs to witness a strong positive to push back the bearish bias.

May the trading luck be with you!