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US Inflation Figures Drive Forex Market Strength

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  • EUR/USD Trading Higher on Weak Inflation
  • Pound also Higher as UK Takes Quarantine Steps
  • US Markets Bounce Back to Continue Rally

The key driver in the forex market through the middle of this week would seem to be the CPI numbers reported by the Labor Department today. These have shown low inflation and a missed number that in turn has strengthened other major currencies against the Dollar. Both the Euro and Pound are trading stronger particularly as Britain steps up with new quarantine measures stemming from COVID-19 cases. US markets too have kept momentum onside at the opening bell with a move higher and many impressive earnings reports.

CPI Miss Boosts EUR/USD

US CPI numbers slightly missed analyst predictions today in figures released by the Labor Department. They show that consumer prices rose slightly in January by 0.3%. This comes after a similar 0.4% rise in December and remains in line with expectations. The annual CPI number came in at 1.4% and slightly below the forecast 1.5% with underlying inflation at 0%. Overall, these numbers reveal that the economy is still getting back on its feet despite a slew of positive momentum, particularly on Wall Street.

The result for those forex trading the Euro and other major currencies has been a boost in strength today. The Euro which had been flagging of late as the bloc struggles to keep a handle on coronavirus cases received a timely boost and is currently trading at weekly highs above $1.21.

UK Hotel Quarantine as Pound Pushes Higher

Sterling was another beneficiary of USD weakness today. The currency is trading at multi-year highs near $1.39 in fact. This is backed not only by the relative Dollar weakness but also by the fact that the post-Brexit UK seems to be changing the tide of COVID-19 in their favor. Their new quarantine rules for incoming travelers, combined with a rapid vaccine rollout are both key factors.

The British government has imposed strict regulations on passengers arriving in England from overseas. They will now have to quarantine at a designated hotel for 10-days after arrival if coming from a current list of more than 30 “Red List” nations. Forex brokers have seen a push higher in the Pound since these measures were announced with many likely hoping this will lead to a further reduction in virus cases across the UK.

Wall Street Opens Green Again

Another day, another move higher for many of the big names on Wall Street. A multi-day positive streak was broken yesterday but has today returned after a breather. The major indices all opened higher and appear to have been further boosted by a number of high profile earning reports beating expectations.

These include both Twitter, and Under Armour who posted a surprising profit. Benign inflation data have also worked to further the push and continue the bull market at one of the most challenging crossroads in American history. Meanwhile, news is still awaited on the progress of the latest $1.9 trillion stimulus package.

 

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

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