The dollar edged up higher against the majors in the Wednesday session following higher than expected producer prices and a better than forecast NY Fed manufacturing survey. The Mach PPI shot up to 1.1%, versus 0.3% a month earlier and 6.9% y/y from 6.4%. The NY Fed manufacturing survey improved by more than expected to 0.63 compared with calls for an improvement to minus 17.5 from minus 22.23.

Sterling Retreats

The pound slumped to its lowest level in nearly two months against the dollar just above the 1.96-level while falling to a fresh record low versus the euro at 0.8062. The catalyst for the weakness in the currency stemmed from softer than expected UK data, which supports the case for additional rate cuts from the Bank of England. The RICS housing index posted its worst reading in over 30-years

The March consumer price index reports were less than consensus expectations, with the headline figure down to 0.4% from 0.7% a month earlier and unchanged on an annualized basis at 2.5%, softer than calls for an increase to 2.6%. The retail price index also declined to 0.3% versus 0.8% from February and down to 3.8% compared with 4.1% a year earlier.

In the coming session, markets await the February labor report, with the unemployment rate seen unchanged at 5.2%. The claimant count unemployment change is estimated at -1k, versus -2k a month earlier.

Cable finds support at 1.96, followed by 1.9550 and 1.95. Subsequent floors will emerge at 1.9460, backed by 1.9430 and 1.94. Resistance is seen at 1.9620, followed by 1.9670 and 1.97. Additional ceilings are eyed at 1.9740, followed by 1.9780 and 1.98.

Euro Retreats vs USD

Germany's April ZEW economic sentiment was sharply worst than expected at minus 40.7, versus forecasts for an improvement to minus 29.0 from minus 32.0 in March. The ZEW current conditions survey improved to 33.2, versus 32.1 a month earlier.

Eurozone inflation reports are due out in the Wednesday session, with Germany's CPI expected to edge higher to 3.1% y/y and hold steady at 0.5% m/m. The Eurozone inflation reports are also expected to rise, up 0.9% m/m and 3.5% y/y. Stronger than expected inflation data will likely support the euro given market expectations for the ECB to maintain its focus on inflation and leave policy unchanged.