Cable pulls majors along; US PCE eyed at 1230 GMT

So far, the day’s move in EUR/USD and USD/CHF have been somewhat influenced by GBP/USD’s continued decline. I saw some Euro bulls pouting when the Eurozone data came out at 0900 GMT just now. Eurozone inflation fell below 2% for the first time since January 2005, with CPI coming in at 1.8% vs forecast of 1.9%. The recent declining oil prices must have been the main reason. However, there has been a surprising pick-up in confidence in the Eurozone during September, and that will support the market’s expectations of more interest rate hikes. Industrial confidence and economic confidence…

rose more than expected, while consumer confidence was in line with consensus.

GBP/USD actually broke below 1.8700 before 0830 GMT (UK mortgage lending data release), and then bounced up from 1.8664 to hover around 1.8700 again before GFK consumer confidence at 0930 GMT. Consumer confidence data reveals that UK consumers became more optimistic about the economic outlook over the next 12 months, leading to a slight rebound in confidence after August’s sharp fall. Figure rose to -7 from -8.

1.8600 will be the next support level for GBP/USD. The pair is quite unlikely to sustain a breakdown through that before the market closes today. 1.8780 should cap any recovery in the meantime.

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