CPI, Brexit Highlight Today’s Forex Action

Posted Tuesday, March 12, 2019 by
Shain Vernier • 2 min read

It has been an active forex session, featuring a collection of primary market moving events. Highlighting today’s trade has been release of the U.S. CPI report for February and the pending Parliamentary Brexit vote due out later today. As expected, participation has been heavy in the pound Sterling. Significant volatility has also been on display in the EUR/USD and USD/CHF as currency players scramble to insulate their portfolios from more Brexit uncertainty.

At the moment, it appears that the U.S. economic slowdown most economists have been predicting is beginning to take hold. Today’s CPI numbers back up this assertion, alluding to slowing inflation and a coming period of potentially stagnant growth. Here is a quick look at this morning’s data:

Event                                                                 Actual     Projected         Previous

CPI(MoM, Feb.)                                                    0.2%            0.2%                0.0%

CPI(YoY, Feb.)                                                       1.5%            1.6%                1.6%

CPI Except Food & Energy(MoM, Feb.)            0.1%             0.2%               0.2%     

CPI Except Food & Energy(YoY, Feb.)               2.1%             2.2%               2.2%

Aside from the monthly CPI numbers hitting their mark, this group of figures lagged expectations. The big takeaway here is the under performance of CPI Except Food & Energy. These figures not only missed consensus estimates but fell from previous levels. Without the recent bidding of WTI crude oil and a slight uptick in U.S. gasoline prices, inflation came in flat.

GBP/USD Monthly Outlook

Trade of the GBP/USD from the Brexit Vote (June 2016) to the pending Brexit Day (29 March 2019) has been unprecedented. While rates have shown periods of extreme volatility, they have remained within the June and October 2016 range.

GBP/USD, Monthly Chart
GBP/USD, Monthly Chart

Overview: As we roll toward the 29 March Brexit Day, there will be many technicals facing the GBP/USD worth trading. However, it will be a good idea to keep an eye on the pre-Brexit Vote monthly high of June 2016 (1.5019) and the October 2016 low (1.1905). These two levels represent each extreme of the entire Brexit process ― if either is taken out, a fundamental revaluation of the pound Sterling will be underway.

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