Although the scale of revival in the labour market continues to bode well for the UK and the US, sluggish consumer price inflation remains a key area of concern for both economies. Against this backdrop, today’s US inflation numbers will be closely eyed to ascertain whether both economies continue hand in hand with regards to inflation, especially after last week’s disappointing UK inflation data. Meanwhile, the minutes of the latest BoE policy meeting released today revealed that two MPC members continued to vote for an immediate rise in the nation’s interest rate.
Yesterday, the Euro came under pressure against the majors following media reports indicating that the ECB might consider purchasing corporate bonds in the near future.
Pound Sterling – UK Markets
The just out minutes of the BoE’s latest monetary policy meeting indicated that two MPC members, Martin Weale and Ian McCafferty, continued to press their case for an immediate increase in the benchmark interest rate, although the majority decided to keep it unchanged at current levels. With an easing trend in the nation’s consumer price inflation along with the recent broadly mixed economic data, the policy decision by the BoE seems to be a step in the right direction. Against this backdrop, a speech from Martin Weale, an MPC member, will be closely monitored to gauge his views over the central bank’s policy stance. Meanwhile, the Pound edged lower against the US Dollar yesterday following disappointing UK public sector net borrowing data and an upbeat US existing home sales report. A similar trend is seen in today’s trading session.
Investors will closely watch today’s US consumer price inflation data along with tomorrow’s domestic retail sales and mortgage approvals data for further direction to risk appetite. With recent domestic economic reports failing to provide clarity on the nation’s economic health, Friday’s third quarter UK GDP numbers will be in focus.
US Dollar – US Markets
The US Dollar is trading on a firmer footing against most of its major counterparts this morning. Going forward today, the main focus will be on the domestic inflation numbers, especially after oneFed official surprised markets last week by suggesting that the central bank should consider delaying the end of its bond purchase programme amid deteriorating inflation expectations. Any downside surprise in today’s numbers might intensify debate among policymakers over the central bank’s future policy stance.
A media report indicating that the ECB might consider purchasing corporate bonds in the near future led the US Dollar to nudge higher against the Euro in yesterday’s trading session. Additionally, data released in the US revealed that sales of previously owned homes rose for September at its fastest pace this year, a sign that the nation’s housing sector recovery is on track. Against this backdrop, investors will now closely follow this week’s new home sales report in order to get a clearer picture of the housing sector in the world’s largest economy.
Euro – European Markets
The single currency dropped against its major counterparts yesterday as a media report indicated that the ECB might unveil additional stimulus measures to boost economic growth in the Euro bloc. Reports revealed that the central bank might consider purchasing corporate bonds in the secondary market next year, if it concludes that more aggressive measures are required in an attempt to revive stagnating economic growth and lift inflation in the region. A decision might be taken as early as December 2014.
In the absence of major economic releases across Europe today, the Euro is looking for direction against the majors this morning. Going forward today, investors in the Euro-US Dollar pair will keep a close watch on the US consumer price inflation report to gauge the inflationary trend in the world’s largest economy. Moreover, tomorrow’s manufacturing activity reports from most of the major European economies, along with Euro zone consumer confidence data, will keep market participants on their toes.
Other Currencies – Highlights
Yesterday, the Aussie Dollar moved higher against the greenback following stronger than expected Chinese GDP data for the third quarter. However, the Dollar has limited its upward movement and is trading in a tight range against the greenback this morning. Data released earlier today showed that the annual consumer price inflation in Australia eased as expected to 2.3% for the third quarter of 2014. Separately, overnight data showed that the Conference Board’s leading index dropped for August. However, the Aussie Dollar showed little reaction to the economic data. In a noteworthy comment, the Reserve Bank of Australia’s Deputy Governor, Philip Lowe, indicated that the nation’s low interest rate policy is appropriate and is needed to support the nation’s economy.
Going forward today, the US consumer price inflation report is likely to bring some volatility in the Aussie Dollar-US Dollar pair. Additionally, comments from the RBA Governor later today and the domestic business confidence data scheduled tomorrow will be keenly eyed by investors.
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