EU stock investors have been disappointed by a higher-than-estimated UK CPI report
The pound is losing ground to both the dollar and the euro as the European trading session gets underway. Inflation figures published early on Wednesday showed that UK consumer prices returned to levels not seen for 40 years, climbing back to 10.1%. With the country’s economic prospects looking bleak, a higher-than-expected inflation reading adds to the woes faced by British policy makers. The pantomime in Westminster ended with the collapse of PM Liz Truss’s unfunded tax cuts and saw them replaced with the toughest austerity plan of the last 10 years. The changes calmed the markets, and gave British assets some respite, while also taking some of the pressure of the Bank of England to raise rates more aggressively. However, this change in dynamics is creating some downside for the pound as illustrated by this morning’s post-CPI release drop.
Ricardo Evangelista – Senior Analyst, ActivTrades
Share markets pared earlier gains on Wednesday, extending Asian losses while US futures also point to a lower open.
This bearish sentiment remains mostly driven by profit-taking moves after benchmarks hit key resistance levels, following a two-day rally, while major uncertainties linger. EU stock investors have been disappointed by a higher-than-estimated UK CPI report earlier this morning, which fuelled the current cautious trading stance from traders, ahead of the highly anticipated EU inflation report later today. Elsewhere, investors are likely to cautiously monitor today’s other major developments such as the US Building permits data, the EIA Crude Oil Inventory report as well as corporate results from Tesla Motors Inc, Procter & Gamble Co and IBM. However, with no significant change in the fundamentals and stock indices still capped by major resistances zones, the bearish trend resurgence will remain as the most likely scenario for stocks.
Pierre Veyret– Technical analyst, ActivTrades
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