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FX round-up: Sterling 'content' with UK inflation, spikes on Trump tweet at N.Korea

By Andrew Schonberg

Date: Tuesday 11 Apr 2017

FX round-up: Sterling 'content' with UK inflation, spikes on Trump tweet at N.Korea

(ShareCast News) - Sterling was stronger on Tuesday after a "content enough" reaction to UK inflation data was followed by a distinct spike higher after tweet action by US President Donald Trump saw US-North Korea tensions heighten.
Safe-haven gold zoomed north after Trump tweeted that North Korea was "looking for trouble" and warned the US would "solve the problem," whether with or without China's help.

Trump's keyboard vent came after Pyonyang promised a strong reaction if the US dared to opt for a military action, warning of "catastrophic consequences".

This added to existing concerns surrounding North Korea's testing of ballistic missiles in recent months.

Diplomatic links between the US and Russia remained taught over a recent US missile strike on an airbase in Syria linked to the alleged use of chemical weapons in that country's civil war.

At 16:58 GMT, sterling was up 0.55% to $1.2483. It was up 0.38% to €1.1761, with the bloc's unit suffering from growing unease and anxiety ahead of the French presidential elections.

The dollar-spot index was down 0.35% to 100.670, while equities indices on Wall St also headed convincingly lower.

"Trump is clearly playing a game of high stakes poker with North Korea and China of late, yet the only problem is that he is doing so against a hugely unpredictable nation," said Joshua Mahony, market analyst at IG.

Connor Campbell, financial analyst at Spreadex, added that, after an initial reaction to UK's inflation data, sterling seemed "content enough" and avoided a forecasted drop this afternoon.

This morning, Office for National Statistics confirmed that the UK consumer-price index held at 2.3% in March, as forecast but above Bank of England's targeted 2%.

Looking at the bigger picture facing the British currency, FXTM research analyst Lukman Otunuga said sterling remained gripped by Brexit woes on the forex charts.

"The candlesticks are trading below the daily 20 Simple Moving Averages (SMA), while the MACD (Moving Average Convergence Divergence) is in the early stages of crossing to the downside," he said.

"Weakness below $1.2400 could be the first signs of a steeper decline, with a breakdown below $1.2370 opening a path towards $1.2300."

Overall, sterling and the US dollar also made gains against the aussie, loonie and kiwi, but both fell on the rand and yen. The greenback was down on the euro.

"From a technical standpoint, the EURUSD is bearish on the daily charts," said Otunuga.

"Prices are trading below the daily 20 SMA, while the MACD has crossed to the downside. Weakness below $1.0600 could encourage a further decline lower towards $1.0500."

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