American shares declined on Thursday after bigger-than-expected inflation figures. The Dow Jones index declined by 0.40% while the S&P 500 fell by 0.62%. The yield of the 10-year also declined. Data showed that US inflation rose by 7.5% in January, higher than the median estimate of 7.3%. The increase happened as demand for goods remained high and supplies struggled. It also happened as the price of oil and gas jumped to a multi-year high. Excluding the volatile food and energy prices, inflation rose by 6% in January. Therefore, analysts believe that the Fed will tighten at a faster rate than expected. Some even see the bank making that decision before its scheduled meeting in March.
The British pound rose sharply ahead of upcoming UK inflation data that will come out in the morning session. Analysts expect the data will show that the economy expanded by1.1% in the fourth quarter. The economy is expected to do even better in the first quarter considering that the country is ending its Covid restrictions. They expect that business investments rose by 2.6% in the fourth quarter. Also, analysts expect that industrial and manufacturing production did well in Q4. On Thursday, the BOE chairman reiterated that the bank will be careful when implementing rate hikes.
The economic calendar will have several important items today. In the morning session, the German statistics agency will publish the latest inflation data. Analysts expect that the data will show that inflation rose by 5.1% in January. Switzerland will also publish its inflation numbers, which will be watched closely. As the data approaches 2.0%, analysts expect that the SNB will start tightening later this year. Elsewhere, the Russian central bank will deliver its first decision of the year while the Fed will publish its monetary policy report.
EURUSD
The EURUSD pair jumped sharply after the latest US inflation data. It rose to a multi-month high of 1.1496, which was above last week’s high of 1.1480. On the four-hour chart, the pair has moved above the 25-day moving average while the RSI is pointing higher. Therefore, the pair will likely keep rising in the near term as bulls target the key resistance at 1.1550.
XAUUSD
The XAUUSD pair rallied even after the strong American inflation data. It rose to a high of 1841, which was the highest level since December 26. It also rose above the 61.8% Fibonacci retracement level while the MACD and RSI are rising. It is also approaching the key resistance level at 1,853, which was the highest point this year. Therefore, the pair will likely keep rising.
AUDUSD
The AUDUSD pair also jumped sharply in the overnight session. It moved to a high of 0.7245, which was the highest level since January 20. The pair has jumped sharply from the year-to-date low of 0.6964. It rose above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) moved to the overbought level. Therefore, the pair will likely keep rising today.
