Two trades to watch: EUR/GBP, Gold

EUR/GBP falls after UK inflation, Chancellor's spring statement next

UK CPI rose to 6.2% YoY in February, up from 5.5% in January and ahead of the 6% forecast driven by energy, food, and fuel costs even before the fallout from the Russian war hits the data.

30-year high inflation will pile pressure on the BoE to keep raising interest rates, which are already at 0.75% of the pre-pandemic level.

However, fears are growing that further rate hikes could hurt economic growth.

The Chancellor’s Spring Statement is due later, where the Chancellor will set out his spending plans.

The euro failed to find strength in recent ECB policy makers’ comments, who don’t consider stagflation to be a concern for the eurozone.

Eurozone consumer confidence data is due later and is expected to fall to -12.3 in March from -8.8.

Where next for EUR/GBP?

EUR/GBP is extending its rebound lower from 0.8450, falling below the 100 & 50 sma, which, combined with the bearish crossover on the MACD, gives sellers hope of further downside.

Sellers will need to break below 0.83 to attack 0.8290, the February 3 low, and head towards 0.8230, the March 4 low.

Any meaningful recovery would need to break above the 50 SMA at 0.8350 to expose the 100 sma at 0.8410.

Gold looks to Fed Chair Powell.

Gold prices remain under pressure on Wednesday as US treasury yields remain elevated on hawkish Fed expectations.

The Russia Ukraine war is failing to inspire gold bugs that are more focused on the more aggressive path of monetary tightening expected from the Fed.

Yesterday Fed Mester said that he expected rate hikes of 2.5% across the year and front loading.

Attention will now shift back to Fed Chair Powell, who is due to speak this afternoon. Earlier in the week, he signaled that the Fed was prepared to hike rates by 50 basis points at any meeting if required. The market is pricing in a 70% probability of a 50-basis point rate hike in May. This is bad news for non-yielding, dollar-denominated Gold.

Where next for Gold prices?

Since March, gold has been trending lower, forming a series of lower lows and lower highs. After falling to a low 1895 on March 16, the price has pushed higher.

Currently, the price trades caught between the 50 & 200 sma. Sellers will look for a move below the 200 SMA at 1910, opening the door to 1895, the March 16 low.

Buyers will be looking for a move over 1936 the 50 sma to attack 1950 the March 17 high.

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