UK inflation, US banks reporting, and BoC rate decision

USD/CAD => The index falls from a 3-week high
JP Morgan => The stock trades 17% lower this year
GBP/USD => The pair struggles around 1.30

BoC rate decision

The US dollar gained versus its Canadian counterpart in the previous session after US inflation surged by more than expected to a new 4-decade high. Notably, core inflation, which removes more volatile items such as food and fuel, grew less than forecast by 6.5%.

Fed Governor Brainard highlighted this as a welcomed development, suggesting that inflation could start to ease from here, limiting the USD gains. The Fed is still expected to hike rates aggressively across the year.

Today, the loonie is gaining as attention turns to the BoC, which is due to announcing its interest rate decision when inflation is high at 5.7%. The jobs market continues improving, with unemployment at 5.4%. The BoC is expected to hike rates by 0.5% or could even raise rates by as much as 0.75%.

U.S. CPI YoY March Actual: 8.5% (0.4%) Previous: 7.9%

Where next for the USD/CAD?

USD/CAD trades caught between the 20 & the 50 SMA. The RSI is above 50 but below 60, suggesting consolidation ahead of the rate decision. A hawkish-sounding BoC could pull the pair below the 20 SMA at 1.2550, opening the door to 1.24, the 2022 low.

A more cautious sound BoC could disappoint and send the pair above the 50 SMA at 1.2660 and to 1.2790, a level that capped gains across late January and early February and 1.29, 2022 high.

JP Morgan Q4 earnings preview

JP Morgan will release Q1 earnings before the market opens today, kicking off US earnings season. Expectations are for revenue to fall 6% to $31.1 billion and EPS to tank 39% compared to last year to $2.73 owing to tough comparisons as the banks unlocked large provisions put aside to cover bad loans in the pandemic. Rising costs amid the digital expansion overseas are eroding profitability even as interest rates rise and are expected to increase throughout the year. The results come as the share price has been under pressure this year.

GBP/USD awaits UK inflation data

GBP/USD fell for a third straight day yesterday as more substantial US inflation overshadowed better than forecast UK jobs data. Unemployment fell to 3.8% and pre-pandemic level, and wages jumped higher to 5.4%, although this was still below the inflation rate of 6.2%, indicating that the squeeze on incomes remained.

Today, UK consumer price inflation is in focus and is expected to rise even higher to 6.7%, boosted by energy prices, food, and fuel. High inflation would build pressure on the BoE to hike interest rates at the next central bank meeting in May, lifting the sterling. While US CPI inflation surged, the focus will be on PPI wholesale inflation, which is expected to rise again.

UK unemployment 

UK CPI YoY March

US PPI YoY March

Actual: 3.8% (0.1%)

Expected: 6.7% (0.5%)

Expected: 10.5% (0.5%)

Previous: 3.9%

Previous: 6.2%

Previous: 10%

 

Support can be found at 1.2980 (2022 low) and 1.29 (round number).

Resistance for the pair can be seen at 1.3120 (20 SMA) and 1.3170 (5 April high).

 


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