Weak UK Inflation sends GBP lower, whilst the USD trades sideways. Focus on CAD & US data today.

hi there Traders this is Brad G with the daily Market insight for Thursday the 21st of December all right now just having a look at what happened yesterday right the UK inflation numbers came out and uh the numbers were much weaker than expected right but just be careful what you get from the news I mean this indicates to us as Traders yeah Sterling should come off and it did come off but uh as you'll see here it's not as aggressive as the new service would you like like you to believe right so dollar high is as big UK inflation drop hits pound increased speculation of interest rate cuts by the bank of England now that's that's a bit far-fetched right and you know what new services are only going to get the headlines if they do uh you know give you some sort of crazy numbers but if you have a look at the uh the bank of England right the overall targets here uh monetary policy the inflation Target's 2% right so coming back to those numbers they are at the moment core inflation or inflation is at 3.9 and uh the rest of the numbers there core inflation that's energy uh I think it's uh food I think it is or out of that fuel sorry um 3.9% is is the core number here right so we're still going a long way they're not cutting rates yet so don't get excited and when you look at the uh the chart this is where you can sort of match everything up and see if the new services are um you know are on the money or not well Sterling has drifted lower yeah for sure but it hasn't like gone a long way and there's a reason for that right we're in a situation where you know just looking at the markets just shrink that chart we've got uh it's like a race to the bottom right the FED even uh the fed's uh hiking policy even though inflation was slightly lower but it's you know it's stalling but that's what they actually what they want they want inflation to come down and sort of stop around you you know that 2 and a half 3% Mark so the FED has got a situation where sorry the FED policy is sort of you know doish now you get a situation where the bank of England are joining the the uh discussion and that sort of sends Sterling down initially but not enough to sort of send it you know screaming to the downside if anything I still think if you look at the charts right take out all the subjective news right that articles and what you've get the dollar is still going down okay that's the overriding theme and Euro Sterling Aussie kiwi are going up what we are going to see are these periodic little o or situations where you know key data comes in tells us a bit of a different picture around say Sterling or Euro or Aussie whatever it might be but unless it's coming from the central bank at the moment it's not going to move the currencies that far now let's not forget we are entering not necessarily the Twilight Zone we are it's more of a holiday zone right so sometimes you know I would call the Monday open in Asia The Twilight Zone where you know the big markets Europe and North America are still on the weekend and there's less liquidity and all these sorts of things well the trading period between Christmas and New Years there's a bunch of days where the markets are shut but there still is um probably more liquidity than there is during that first Monday open in Asia right so there are opportunities to come into play but understand when as a Trader right you know how the markets work and what we're talking about is you know following the trail of the economic numbers and the central banks to tell us exactly you know what's fair value for each currency all right that's why we're looking at these numbers and if youve scroll down here right you come into uh today's trading we do have some key numbers and there's more to come on Friday Friday is probably the key trading day for the week right the last stop Saloon all the bankers will be at work it'll be their last big trading Daye and there's a load of you got some UK numbers and Sterling don't forget from here on in for this week the Sterling takes on on new meaning right because we we've got the backdrop of weaker inflation does that follow through into these other numbers if it does you're going to see Sterling take another big run to the downside that's when Traders will be confident to get in make some cash right but I don't think they're going to be long-term trading opportunities close of business Friday you're going to see most uh trading desks square up and take profit now looking at trading today you know you've got some Canadian retail sales figures um Canadian uh inflation numbers I'll tell you what they're pretty close to their target uh and that's why we haven't seen too much go on with with dollar CAD we've got the final us numbers on GDP now the final numbers okay the the Bureau of stats Etc have a longer time to process the numbers so the final numbers are usually a little bit closer to the mark but check out the numbers here there's a big disparity between the consensus and the previous month so just keep an eye on that will it impact I'm not sure the initial jobless claims will be something worth having a look at as will the Philly fed Manufacturing Index there as well now I wouldn't be worrying too much about uh Japanese inflation that's not really going to come into it so when you come back and this is where I was sort of starting if I just get back onto the chart just be aware that there's no really clearly defined which instrument or which currency is going up or down off recent data right just think of it in a bit more of a medium to longer term perspective and to me that's why still I I've got a bias for a weaker dollar now I know doly 's come back and the BJ come out with slightly weaker policy but overall the dollar is still going down and that's what you've got to Target so if you don't uh uh get on board that you're gonna sort of walk into a situation where you think oh I've got some weak Euro data but there's still pressure on the downside in in the dollar so euro is not going to go far unless it's something extreme if anything slightly stronger Euro Sterling Aussie kiwi data would be something that may move these instruments higher okay now take one step back connect the dots we've just had weaker UK inflation numbers so the easiest Trail on the downside I'm not saying it's going to break down through 12560 but weaker UK numbers it it builds a bigger picture around you know the possibility of lower rates in 24 by the bank of England right so that's the easier trade and that's what you got to do with the US numbers as well okay so you know what if we get confirmation as we go through Thursday and Friday's trading with these us numbers right and there's a there's a really good load of numbers here that you can really rip into uh the PC price index is one of my favorites obviously the durable goods uh anyway there's a whole bunch of numbers here that if these numbers come in Weak well it supports a weaker dollar against everything right and that's the easiest trade so we're in a situation it's a bit of a conundrum we're weighing up Central Bank policy and like we've had these Wicked UK inflation numbers but we haven't heard from the bank of England yet right that does they don't come out and start commenting on each number so anyway what I'm saying is the markets are aren't really we're we're in this sort of halfway three quarters through the process of what they've done with hiking rates inflation's coming down so particularly in the US UK pretty much everywhere so now it's a more of a situation where Central Bank um tone or comments um or sentiment is starting to get a bit mixed they're all getting into the same bag right so Trading shortterm is probably a better opportunity than looking for a bigger Longer term trade because at the moment we've got a mixed bag here and you may see you know 15 20 25 Point moves and then it stalls it might be time to take some cash but uh and that's what we're sort of dealing with right it's just that that phase of the market not only where the central banks are are sort of joining all their policies are getting similar or their sentiment but we're also coming into the holiday season as well it is a great time to sort of Disconnect um I've seen really good market conditions uh between Christmas and New Year like going back probably more late 90s early naughties but uh so either disconnect or just have a look you know you might have a few opportunities but I'll give you some more details on that tomorrow the uh and obviously you want to know which uh days the um markets are uh closed obviously very important right now at the moment we've got a uh a riskof profile the currencies have just reset their ranges but Euro steerling o kiwi were drifting lower and the dollar generally up except for dollar n right so that's there's a bit of a risk on profile here at the moment the bond prices are up which means the yields are down which suggests a lower dollar right and that's what I'm sort of dealing with when I look at the currencies I'm looking for okay so what's going on well most of them are in the middle of a range right and that's not uh easy to sort of stick some risk in uh if Euro and Sterling for whatever reason go down well we've got some entries here to get short Aussie and kiwi they look a bit overextended at this point uh the rest of them well I don't know but I'll tell you what there will be some stop losses above that trend line in dollar Yen dollar Swiss looks very happy going down does as does the dollar Index we're just in a bit of a pause right as I said today we've got some data Friday it's going to be a big reshuffle you probably see Traders having a a good old crack being almost the last trading day for many Traders right particularly the guys in the banks all right guys that's all from me at the moment a little bit long winded wet there sorry uh I will come back with a bit of an overview what trading days are open and closed through the holiday break Etc get you prepared for um potential trading during that time or uh and give you a bit of insight into what we're doing as far as new releases coming in into 2024 all right guys anyway have a good trading uh day if you're having a look at the markets if you don't like what you see technically I'd just be uh having a quick look see what's going on come back if you've got time Friday well that North American session is definitely going to be Lively as well as the European with the UK data right that you got to use the edge you get from previous numbers like these inflation numbers they're still in everyone's Minds weer UK numbers on top of that paints a pretty good picture for weer Sterling all right guys have a good one all the best cheerio