EUR/USD: Long For 1.1960

EUR/GBP supported by lower-than-expected British CPI reading
Macroeconomic overview:

• British inflation held at its highest level in five-and-a-half years in October, and wrong-footed expectations from the Bank of England that it would hit a new peak.
• Consumer price inflation held at an annual rate of 3.0% in October, the Office for National Statistics said, below market average expectation for a 3.1% annual rise.
• The BoE said this month, after it raised interest rates for the first time in a decade, that inflation would probably peak at 3.2% in October and then fall slowly to just above its 2% target in three years' time.
• Tuesday's figures are likely to reinforce doubts about the wisdom of the BoE's decision to raise rates at a time when the economy is sluggish, especially as the effect of last year's Brexit vote on import prices was already at its high point.
• BoE Governor Mark Carney has said the overshoot of the 2% target was due to the effect of the more than 10% fall in the pound after last year's Brexit vote pushing up the price of imported goods.
• British inflation surged from a subdued 0.5% at the time of the Brexit vote in June 2016 to its highest since April 2012 in September.
• The Office for National Statistics said October's steady reading reflected falls in fuel prices being offset by a higher cost of food.
• The alternative measure of retail price inflation, which is used to calculate payments on government bonds and many commercial contracts, rose to a near six-year high of 4.0% - bad news for finance minister Philip Hammond as he prepares an annual budget due on November 22.
• However, the failure of consumer price inflation to exceed 3% means Carney will be spared a legal duty of having to write a letter to Hammond alongside next month's rate decision, explaining why inflation is more than a percentage point above target.
• Costs of manufacturers' raw materials - much of them imported - were 4.6% higher than in October 2016, down from an inflation rate of 8.1% in September. The market had expected a fall to 4.8%.
• Sterling slipped to its lowest in almost three weeks against the euro on Tuesday, while Britain's main FTSE 100 stock index jumped to a session high, after UK inflation data came in slightly weaker than expected.

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Technical analysis and trading signals:

• The EUR/GBP broke above 55-dma at 0.8920 and the daily cloud base at 0.8928 today. A sustained move into the cloud targets the cloud top at 0.9027. Daily slow stochs are near OB territory but the bulls show no sign of letting up just yet.
• We have raised our bid to 0.8915.