BoE Policy Meeting Minutes in Focus
While today’s UK data showed that the consumer price inflation remained well below the BoE’s 2% target rate, it was marginally ahead of market expectations. Benign price trends from the UK lately have severely dampened expectations of a rate rise in the UK. Going forward, market participants will eye the minutes of the latest BoE’s policy meeting tomorrow to gauge the central bank’s views on the future course of interest rates.
Across the Atlantic, yesterday’s downbeat industrial production offered fresh signs of headwinds for US growth. In the Euro zone, with the German economy escaping a recession in the third quarter, today’s ZEW survey will shed light on economic conditions in Europe’s largest economy during the final quarter of 2014.
Pound Sterling – UK Markets
Data just out has shown that annual consumer price inflation in the UK rose for October. This has brought some relief to market participants, especially after last week’s BoE quarterly inflation report indicated that Britain’s headline inflation is likely to fall below 1% in the coming six months. However, with weaker global crude prices and the spectre of economic stagnation in Europe, Britain’s inflation is likely to remain well below the central bank’s mid-term target rate in the near future. Meanwhile, today’s data further revealed that core inflation remained unchanged, signalling that softness in wage earnings could continue.
The Pound is trading in a tight range against most of its key peers. Going forward, market participants will keep a tab on the minutes of the BoE’s latest policy meeting due for release tomorrow. Considering the dovish tone of the BoE in its inflation report recently, no hawkish surprise is expected in tomorrow’s publication. Traders are likely to focus on the slack in the nation’s job market, particularly after last week’s mixed labour market report.
US Dollar – US Markets
The greenback traded on a firmer footing against its major peers in yesterday’s trading session, despite data released in the US showing that industrial production dropped unexpectedly for October. The drop was mainly led by a fall in motor vehicle production and subdued performance of the mining and utilities sectors. The weak manufacturing sector data has raised fears among market participants that US economic growth could be losing momentum amid tough global conditions. Moving forward, traders will shift their focus to today’s US NAHB housing market report for November to gain a broader insight into the state of the nation’s housing sector in the fourth quarter. Separately, investors will eye producer price inflation data in the US which is expected to show that prices of factory inputs eased.
Meanwhile, the US Dollar is trading slightly lower against the majors this morning. Today’s ZEW economic sentiment survey in the Euro zone will gain attention for further direction to the greenback against the common currency.
Euro – European Markets
The common currency nudged closer to the 1.25 mark against the US Dollar ahead of today’s German ZEW sentiment survey for November. The survey is expected to show that economic sentiment in Germany recovered in November. Going forward, traders are likely to keep a close eye on this week’s PMI readings across key European nations for November, in order to seek greater clarity on the state of affairs in the private sector in the midst of turbulent economic conditions. Most of these readings are anticipated to show only a marginal improvement in the pace of activity in the Euro bloc.
In yesterday’s trading session, the Euro lost ground against its major counterparts after the ECB Chief, Mario Draghi, reiterated that the central bank stands ready to act if necessary and buying sovereign bonds was an option. Additionally, he indicated that the stimulus measures of the ECB are delivering tangible benefits and demand for new credit is picking up in the region.
Other Currencies – Highlights
The Aussie Dollar showed little reaction to the minutes of the RBA’s latest policy meeting published earlier today and remained range bound against the greenback. The minutes revealed that Australia’s economic conditions and labour market growth are likely to remain under pressure for some time to come, amid a gradual improvement in the nation’s non-mining business investment. Additionally, the RBA Governor, Glenn Stevens, stated that the slack in the labour market and low inflation would enable the central bank to keep interest rates low for now. In a noteworthy development, China signed a free trade deal with Australia over the weekend allowing the latter to gain better access to the world’s second largest economy.
With no notable macro releases on the domestic macro front today, the Aussie Dollar is expected to take direction from global cues. Additionally, traders will keep a tab on the FOMC minutes and consumer price inflation data in the US this week for further direction to risk appetite.