Investors Shrug Off Rise in U.S. Inflation

U.S. Consumer prices rose more than expected but the slightly higher reading was not enough to push the U.S. dollar higher as investors speculated the rise in inflation was not enough to lead to a change in the Federal Reserve’s policy path. Moreover, a lot of recovery and inflation have already priced into the market with higher taxes now becoming a bigger risk than the pandemic.

The best performer was the euro which rose against the greenback with the EUR/USD trading around 1.1965 this morning, entering a crucial resistance zone. We expect further gains until 1.1980 and possibly even a test of 1.20 before more sellers show up. A higher support is now seen at 1.1890.

The GBP/USD resumed its upward trend after a dip below 1.37 proved short-lived. We see a next bullish target at 1.3840 but recommend sterling bulls to wait for a sustained break above 1.3850 and more importantly above 1.3920 to expect further gains until 1.40 and 1.42. On the downside, the 1.36-support remains in focus.

The DAX continued its consolidation and as long as there is no breakout either above 15300 or below 15200 there is nothing new to report.