On January 22, official data released on Wednesday showed that the UK's inflation rate rose for the first time in five months in December, moving further above the Bank of England's inflation target. The UK Office for National Statistics indicated that the Consumer Price Index (CPI) increased by 3.4% year-on-year in December, up from 3.2% in the previous month. The agency pointed out that a hike in tobacco taxes and increased demand for outbound travel during the Christmas period were the primary factors driving the inflation higher for the month. The extent of this inflation rebound was slightly lower than market expectations, as most economists had previously forecasted the figure would rise to 3.5%. They believe the December inflation increase is merely a short-term fluctuation, with the overall inflation trend still pointing downward and gradually converging towards the Bank of England's 2% target level.
Separately, European Central Bank President Christine Lagarde delivered a speech at a panel discussion during the World Economic Forum in Davos on Wednesday local time. She emphasized that the world is transitioning into a new, unpredictable era, with a "new world order" taking shape. European nations need to prepare for this shift and are expected to use this opportunity to advance the process of European integration. "A new world order is emerging," Lagarde stated in her Wednesday address, noting that within this new international framework, global cooperation, free trade, and US leadership are being replaced by a more fragmented system. She added that the European economy requires a "profound examination" to confront the advent of this new international order. Lagarde also commented that if European countries eliminate non-tariff trade barriers, it would make them collectively stronger.
Key economic data to watch today includes the UK January CBI Distributive Trades Survey, the US Third Quarter Real GDP Annualized Quarter-over-Quarter Final Reading, US Initial Jobless Claims for the week ending January 12, the US November Personal Spending Month-over-Month rate, and the US November PCE Price Index Year-over-Year.
US Dollar Index The US Dollar Index trended upwards yesterday, closing slightly higher on the daily chart, with the current exchange rate hovering around 98.80. Besides short-covering providing some support, the primary reason for the index halting its decline and rebounding was US President Donald Trump's latest remarks, which alleviated trade tensions. However, the weak economic data released during the US session limited the index's rebound potential. Focus today is on resistance near 99.30, with support around 98.30.
EUR/USD The Euro declined against the US Dollar yesterday, closing slightly lower on the daily chart, with the current exchange rate trading around 1.1690. Profit-taking exerted some downward pressure, and the US Dollar Index's rebound, supported by eased trade tensions, was also a significant factor weighing on the Euro. Nevertheless, lingering concerns about trade uncertainties and expectations that the ECB's interest rate cutting cycle is nearing its end limited the pair's downside. Attention today is on resistance near 1.1800, with support around 1.1600.
GBP/USD The British Pound declined against the US Dollar yesterday, closing slightly lower on the daily chart, with the current exchange rate hovering around 1.3430. Profit-taking contributed to the selling pressure, but the main factor driving the Pound's weakness was the rebound in the US Dollar Index, which was fueled by President Trump's recent comments cooling market risk aversion. However, the generally positive economic data released from the UK during the session limited the pair's decline. Focus today is on resistance near 1.3500, with support around 1.3350.
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