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ALL QUIET ON THE WESTERN FRONT

ALL QUIET ON THE WESTERN FRONT

With a lack of UK-centric data yesterday, Sterling made ground on the Euro following the recent fall resulting from Mark Carney’s comments on delaying any interest rate hike. Opening at 1.4064, it steadily rose 70 pips throughout the day. It was a calm trading day. Even with brief spikes when US Business Optimism and Wholesale Inventories were released the pair was restrained to a 50 pip range by close of play, only 15 pips down on opening.

It was a moderately positive day for the US Dollar yesterday in terms of price action versus its most traded counterparts. It was able to hold Sterling back during its midday charge towards a key level of resistance. Even towards the close, there was another test of Sterling resilience, with the Dollar asking further questions with a chance of another move lower.

Versus the Euro, the pair entered new territory as the Greenback systematically broke the defences of the single currency. By the close of the London session, the Dollar had broken through yet another key psychological level – watering the mouths of the analysts who called for parity between the pair. This comes despite the US import price index falling further than expected in October.

The import price index dropped 10.5% in the 12 months to October, beating the 9.5% consensus – largely contributed to by the considerable fall in petroleum prices. The higher the reading, the greater chance it will impact inflation which in turn heightens the possibility of a rate rise. Conversely, a lower reading diminishes those chances…a buzz word for market participants right now.

We do not have any influential data to look to from the US today, any price action will be dictated by outside sources such as employment data from the UK, Bank of England Governor Mark Carney’s speech or the speech just after 1pm from European Central Bank President Mario Draghi.

An uneventful day as well for the Euro yesterday with little to no releases to influence price action. More of the same today, until Draghi speaks just after lunch. Markets will be poised to see if Draghi will continue to suggest that quantitative easing will be extended and the deposit rate will be cut further in order to provide extra stimulus to the single currency bloc. Further confirmation that action will be taken in December could see the Euro lose further ground against both the Dollar and Sterling.

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