The markets today have been dominated by USD decline. New highs were made on both GBP/USD and EUR/USD pairs with most indicators signalling further decline for the US Dollar. There is significant scope for further decline tomorrow with headline US inflation data and Retail Sales being the key focus. If these indicators signal any stalling of the US economy we could see GBP/USD move towards 1.63 and EUR/USD move towards 1.45.

The Euro remains strong today, focus tomorrow will be on the inflation data ‘HICP’ in the morning. Many would argue that the UK has a future inflation problem brewing with inflation remaining stubbornly over 3%. The Eurozone is unlikely to suffer as badly from inflationary pressure in light of the fact that the rates are spread over 16 countries. This can of course be a problem for the ECB attempting to manage monetary policy in a mannor that suits all members. Where some benefit others will suffer.

Inflation clearly isn’t a problem in the US at the moment. The producer prices index has shown today that the US is neither suffering from inflation or deflation. The lack of price pressure is the reason for the Fed’s decision to continue to hold interest rates at ultra low levels for the next quarter.

Support and Resistance
GBP/USD – Resistance 1.6067 / Support 1.5754
GBP/EUR – Resistance 1.1717 / Support 1.13-1.1320

Economic Releases
EU-16 – Foreign Trade Balance (August) 1000
EU-16 – HICP Final (September) 1000
ITL – CPI Final (September)
US – CPI (September) 1330
US – Empire State (Oct) 1330
US – Real Earnings (September) 1330
US – Retails Sales (September) 1330
US – Michigan Sentiment (October Prelim) 1455
US – Business Inventories (August) 1500

Best Regards
Luke Zorab

Torfx Currency Dealer
(01736) 335285