Inflation data key today

This Daily Digest will cover:

• Inflation data key today
• U.S. CPI expected to fall to 3%
• USD weakness dominates as long positions unwound

This week has seen the USD under significant pressure so far as accounts square long positions predominantly against the YEN. USD/JPY has fallen from 145 to 139.30 in a straight line on little fresh news. This feels like a full squeeze on positioning ahead of the key CPI data today and little fundamental has changed. Euro has gained a foothold above 1.1000 and is eyeing the year’s high at 1.1105 but lacks the momentum shown elsewhere. GBP/USD is pushing towards 1.3000 which was the break region when the Truss/Kwarteng debacle happened and with positioning feeling a little extreme I feel this region is likely to be the top of the range for a while – See chart of the day below.

Key data today is the U.S. CPI which is expected to continue to show a fall towards 3%from 4% last month. Unless this number is significantly below 3% I don’t think it will stop the FOMC from raising rates this month. CPI has proven pretty easy to predict for economists and misses are few and far between, but with long USD positioning much reduced an upside surprise could see an exaggerated reaction.

Crypto continues to be quiet but has held initial support levels easier than I expected. Nothing really new here to talk about and the well defined tight levels continue to be the ones to react to – above 31,400 and 1920 in BTC and ETH.

GBP/USD daily chart above.

Good luck as always

Richard Usher
Head of OTC Trading