Russell Glaser
Name: Russell
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The US dollar was mostly lower at lunchtime in the European trading session after inflationary data was in line with consensus estimates in both China and in the UK.
The euro was higher versus the majors after Chinese inflation was in-line with consensus forecasts at 5.5%. The fact that the numbers did not come in above expectations was a positive for both global equities and the euro. Stocks were able to shrug off an additional increase in Chinese bank reserve requirements as the Nikkei climbed 1% to finish the day while the German DAX is up a solid 1.5%. Economists expect further interest rate increases though a hard landing in the Chinese economy may be avoided. EUR/USD resistance looks to be at 1.4550 at the 61% retracement of last week?s declines. Support is found at the overnight lows from Sunday at 1.4320.
Sterling was bid after UK y/y inflation met economists? forecasts at 4.5%. Market talk of bringing forward UK interest rate expectations may be premature as some proponents attempt to piggy back on yesterday?s hawkish comments by BoE MPC member Martin Weale. The BoE may maintain a loose monetary policy stance in light of the tepid UK economic recovery. As such, the last two days of gains for Cable may offer traders better levels at which to enter short. Resistance comes in at 1.6450 followed by the May 31st high at 1.6550.
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