EBC Markets Briefing | Pound robust after CPI report; silver prices through the roof

The British pound perched around a four-month high against a softening dollar on Tuesday, extending gains from last week when strong domestic data pushed the currency higher.

Businesses reported their fastest upturn in activity since April 2024 in January, while retail sales rose unexpectedly last month. Both have cemented the case for a pickup in the economy.

The Labour Party blocked the return to parliament of Manchester mayor Andy Burnham, seen as a potential challenger to PM Starmer. The British leader will head to China this week for a thaw in bilateral relations.

This move is seen as part of efforts to seek various economic breakthroughs amid rising tensions with the US. The UK aims to export more luxury cars, clothing, whisky and financial service products.

Data on Wednesday ‍showed headline inflation for December rose for the first time since July, climbing to 3.4% largely due to food costs. The reading remains the highest among major developed countries.

However, the pace of price increases is expected to ⁠slow sharply in ⁠the coming months as last year's rises in utility costs and other local tariffs fall out of the annual comparison.

Sterling surged after consolidation above 200 SMA, sitting in overbought territory. The double-top pattern will likely form, which suggests a significant pullback from the current level.

Asset recap

As of market close on 26 January, among EBC products, silver led gains. Analysts believe signs of profit-taking indicate that the bullish sentiment-driven rally has become evidently fragile.

Intel extended its losses after its latest earnings report, even as some analysts turned more constructive on a recovery in the personal computer market and early momentum in its contract chipmaking business.

The spike in US gas prices has reverberated across overseas markets. What has changed in recent years is that cold weather conditions in the U.S. can now lead to higher gas prices in Asia and especially Europe.

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