Forecasts for UK industrial production anticipated a rise from 1.1% to 1.3%. However, the previous data was revised for the worse, to -3.2%, suggesting that the British industry did not grow a month earlier, but fell sharply. Moreover, the rate of decline even accelerated to -5.2%. So there is no doubt that the British economy is steadily slipping into recession. But the bad news for the pound didn't end there, as the US producer price index fell from 8.7% to 8.5% from the forecasted 8.4%. That is, inflation in the United States is declining much slower than expected, which is likely to force the Federal Reserve System to continue raising interest rates at the same pace.
Producer Price Index (United States):
However, despite all this, the pound was growing. The reason was rumors that the Bank of England, albeit in a limited form, will continue to buy government bonds after October 14. In particular, pension funds, in order to prevent bankruptcy. So far, these are just rumors, but it turned out to be enough to strengthen the pound's position since the financial condition of pension funds is now one of the main threats to the British economy. At least for the moment. And there are fears that if the BoE completes the asset purchase program, a number of pension funds may go bankrupt and pull the entire British economy with it.
But the euro stood still, partly for the simple reason that British problems do not concern it directly. And also because of the rather good data on industrial production. Forecasts say that the decline in production of -2.4% will be replaced by a growth of 0.7%. But it turned out that the growth rate was as much as 2.5%. And even the revision of the previous data for the worse to -2.5% did not overshadow such good news. As a result, excellent European data overlapped with data from the United States, which kept the euro stable.
Industrial production (Europe):
Nevertheless, even British problems will fade into the background today, as the focus will be on inflation data in the United States, which will give the final answer to the question of the further pace of the Fed's interest rate hike. According to forecasts, the growth rate of consumer prices may slow down from 8.3% to 8.2%. However, yesterday's data on producer prices hint at the possibility that inflation will remain unchanged. And if this is the case, investors will assume that the refinancing rate in the United States will increase by 150 points by the end of the year. Whereas at the moment, everyone is proceeding from a 125-point increase. This difference is enough for a fairly serious growth of the dollar.
Inflation (United States):
The EURUSD currency pair is in the stage of stagnation, despite the variable price jumps. The value of 0.9700 serves as the equilibrium level, relative to which the lateral amplitude was formed. For a downside signal to appear, the quote needs to stay below 0.9660. While the upward scenario will become relevant at the time of holding the price above 0.9780.
The GBPUSD currency pair returned above the level of 1.1000 again, which indicates a high speculative interest in the market. In this situation, there was a signal to buy, but it was not confirmed. To strengthen long positions, the quote needs to stay above 1.1180. In this case, the buyers will have a chance to move back to the resistance area 1.1410/1.1525.