High impact week: US inflation and conflicts between the UK and the EU

The euro and the pound once giving way to sellers. The dollar is preparing to take ground this week although we do not know how long it could last. On Wednesday the 10th and Thursday the 11th, the inflation of the producer and the consumer of the United States respectively is presented. The market anxiously awaits favorable data for the dollar, however the forecasts are not cooperating. A new inflationary rise is estimated for Americans. This week could be an opportunity for investors in the Eurozone (EUR) and the United Kingdom (GBP). Prices reached their annual lows again on Friday. Although new confrontations are expected in former business partners.

The currency market will keep its distance from the worries of the euro zone while waiting for the US inflation data. The USDCAD for its part remains in its buyer zone holding positions above 1.24. Positive employment data for the trading day on Friday was uncooperative enough to push a price to 1.25. We hope that’s the job of inflation data. While USDJPY relaxed thanks to the good employment data on Friday and is trading for sell pending the levels of 113.0 and 112.0. If inflation fails to sustain within the previous month’s levels then a new quote below 1.24 is possible for USDCAD and strong buyers for USDJPY. Commodities remain buyers. Against the forecasts, investors in metal decided to stay bought. For gold, we estimate the September highs between 1820.0 and 1830. In silver, the levels of 24.30 and 24.50 are suggested.

The EU and UK are heading for another Brexit showdown and this will likely limit the potential for a battered sterling to recover. Following the completion of a third meeting between the EU and the UK on Northern Ireland, it was confirmed that no further progress had been made. News reports suggest that the UK is increasingly frustrated and is preparing to activate article 16 of the Northern Ireland protocol with a view to overriding elements of the protocol that it considers problematic.

The main crossover GPBUSD would have hit the lows of September this year again. The latest announcements from the UK Central Bank exposed the troubled commercial economy. The employment, inflation and GDP numbers fell for this year and for 2022. The cross could be trading below 1.35 for the remainder of the year and for 2022. The EURUSD for its part managed to pass the minimums of September and is already positioning in its zone again below 1.16. The economic crossover will continue and both (the EU and the United Kingdom) will fight to maintain a low price of their currencies.

The vice-president of the EU Commission pointed out in Brussels that there would be “serious consequences” for the activation of Article 16. The exact consequences are not clear and would depend on the scope of the UK measure (specifically which parts of the protocol it intends to override), but some outlets are reporting that EU officials say a full-blown trade war could turn out. The pound has been closely following the issue for several days, noting that it has been of little importance to the markets, but could now grow in importance to the markets.