Speaking of inflation, the headline U.S. CPI number came in marginally higher than expectations while the core CPI print was in line at 0.2 percent (MoM). Most FOMC participants saw inflation risks as weighed to the upside and price pressures could sustain for longer than policy makers expected, yesterday’s FOMC minutes showed. A taper will be almost certainly announced at the Fed’s November meeting. The U.S. dollar weakened in the aftermath of yesterday’s reports since much of that expectation has been already priced in.
The best performer was the DAX that provided buyers a good gain (in our case a 100-points-profit). As long as the index holds above 15000, we will focus on a potential test of the 15500-area.
EUR/USD: We expect the pair to trade between 1.1750 and 1.15 in the near-term. Chances are slightly in favor of the bulls right now.
GBP/USD: A sustained break above 1.37 could drive the pair towards 1.3850 but sterling bulls should be cautious since sterling’s outlook clouded over somewhat. Falling back below 1.3540, a next lower target is seen at around 1.3370.
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