BoE Quarterly Inflation Report Anticipated
Data just out has revealed that wage growth in the UK nudged higher while the unemployment rate unexpectedly remained stable at 6% for the third quarter of 2014. However, with the BoE Governor scheduled to present the inflation report later today, the Pound has shown little reaction to today’s UK labour market data. The inflation report will be scrutinised to gauge the influence of Euro zone economic weakness on Britain’s economy.
In the Euro zone, the ECB President, Mario Draghi’s comments later today will attract market attention as uncertainty continues to build up over the prospects of further stimulus in the region. Additionally, Euro zone industrial production data will be in focus today and is anticipated to show a rebound for September.
Pound Sterling – UK Markets
The just out UK labour market has shown that the unemployment rate in the nation remained unchanged and domestic earnings improved more than expected for the third quarter. With key BoE officials raising concerns about easing inflation and muted earnings growth in the nation, today’s domestic earnings growth data has brought some relief to Sterling investors. Additionally, the report further revealed that the number of jobless claimants declined for October, albeit at a slower than expected pace. However, Sterling has shown little reaction to the report as traders remain focused on the BoE’s quarterly inflation report due later today. The report is unlikely to offer any hawkish surprise, however, it will be eyed by market participants to gauge the impact of weak Euro zone inflation on the nation and to get an insight into the timing of an interest rate rise in the UK. Furthermore, economic growth, inflation and unemployment outlook numbers to be published in the report will generate market interest.
In yesterday’s trading session, the Pound gained ground against the greenback and crossed the 1.59 mark.
US Dollar – US Markets
The greenback moved marginally lower against its major peers in yesterday’s trading session despite the NFIB survey in the US showing a more than anticipated improvement in morale among small firms for October. The survey revealed that small businesses planned to make more investments in machinery and land and expand their workforce, although they experienced difficulty in filling new job openings. Meanwhile, a noted hawk in the FOMC, Charles Plosser, stated that improving economic data from the US signals that interest rates need to be raised. With calls for an interest rate rise getting louder, the focus will remain on the upcoming economic releases from the US for further clarity on the course of monetary policy that the Fed will set in motion in 2015.
With no notable domestic macro releases in the US during today’s trading session, the greenback is likely to take direction from Euro zone industrial production data due later today. Moving forward, market participants will keep a tab on this week’s US retail sales data which is expected to show a rebound for October.
Euro – European Markets
Data released earlier today showed that German wholesale prices dropped more than anticipated for October. Considering that last month’s German consumer price inflation missed market consensus, today’s data did not provide any evidence about easing deflationary pressures in the Euro bloc. However, there was no major movement in the Euro as market participants look forward to today’s Euro zone industrial production data for further cues. The report is expected to show a monthly rebound in industrial production for September after falling sharply in the previous month. Additionally, comments by the ECB Chief, Mario Draghi, later today will be keenly watched. Although he is not expected to throw any major surprises, his speech will attract market attention as uncertainty continues to build up over the prospects of a sovereign bond purchase programme in the Euro zone.
The common currency is trading in a tight range against the US Dollar this morning. Market participants remain focused on the Euro zone preliminary GDP reading due later this week to verify if the region’s economic growth remained in positive territory for the third quarter.
Other Currencies – Highlights
The Kiwi Dollar nudged higher against the greenback in today’s trading session following the release of the Reserve Bank of New Zealand’s financial stability report. The report revealed that the central bank does not plan to relax its mortgage lending norms as high inflow of immigrants and low borrowing costs are likely to overheat the housing market. Additionally, the RBNZ Governor, Graeme Wheeler, indicated that risks of a bubble forming in the housing market are unlikely, especially after the central bank introduced tighter lending norms last year and as growth in household debt and domestic earnings remained proportional.
Later today, New Zealand’s business PMI data for October will be eyed for further direction to the Kiwi Dollar against its key peers. Additionally, this week’s retail sales and Reuters/Michigan consumer confidence data in the US is expected to keep investors interested.