Today’s GfK report indicated that morale among consumers in Britain deteriorated for October. With inflation in the UK outpacing wage growth, the weakness in consumer sentiment probably signals some fatigue in Britain’s consumer-led growth. Meanwhile, Sterling investors will keep a tab on PMI readings along with the BoE policy meeting scheduled next week for further direction to risk appetite.

Currency markets witnessed some action earlier today after the Bank of Japan unexpectedly expanded its monetary stimulus. With the weekly session drawing to an end, market focus for today is on the Euro zone consumer price inflation print to ascertain if the ECB needs to do more at its policy meeting due next week.

Pound Sterling – UK Markets

Sterling is trading in a tight range against the greenback this morning. The GfK report released overnight revealed that consumer confidence in the UK deteriorated for October, albeit in line with market estimates. Data highlighted that domestic macro conditions remained subdued for the initial phase of the fourth quarter, as domestic risk appetite took a hit from muted wage earnings growth. Going forward, next week’s manufacturing and services PMI readings will be crucial in helping market participants reassess their view on Britain’s macroeconomic conditions, especially after some BoE officials earlier this week highlighted prospects of a delay in the timing of an interest rate rise in the UK.

Meanwhile, the Pound gained ground against the common currency and breached the 1.27 mark in yesterday’s trading session. Nationwide reported a second consecutive slowdown in the annual growth of house prices for October, which can be partly attributed to the BoE’s tough lending measures introduced earlier this year to curb mortgage loan growth.

US Dollar – US Markets

The greenback failed to register any further gains against its major peers yesterday following the release of an upbeat preliminary GDP report. Data showed that the nation’s economy grew at a robust pace for the third quarter due to an upswing in military spending and a decline in imports. The report further revealed that business spending improved moderately and exports remained supported despite subdued global demand. Traders will now keep an eye on further revisions to the nation’s GDP reading for a broader perspective on the nation’s macro recovery in 2014.

The US Dollar rallied and climbed to fresh multi-year highs against the Japanese Yen this morning following the Bank of Japan’s decision to expand its asset purchases programme. Moving forward, next week’s official US labour market report for October will be crucial in helping investors gauge their views on the nation’s employment conditions, particularly after the latest FOMC minutes revealed that the slack in the job market is gradually declining. Additionally, the ISM surveys due next week will be eyed to assess the health of the private sector for October.

Euro – European Markets

Data released earlier today revealed that German retail sales grew at a stronger than anticipated annual pace for September. Despite the encouraging economic data from Germany, the Euro failed to hold on to the 1.26 mark against the US Dollar. For the day ahead, traders will eye the flash estimate of consumer price inflation in the Euro zone. Data is anticipated to show an improvement in the region’s inflation rate for October, although the likelihood of a downside surprise cannot be ruled out, especially considering the recent decline in oil prices.

Yesterday, Germany reported a more than expected drop in its consumer price index for October. With the recent data showing a benign price environment in Germany and Spain, the threat of deflation continues to cloud the prospects of an economic recovery in the Euro zone. Against this backdrop, investors will keep a tab on the ECB’s policy meeting scheduled next week to verify if the central bank unveils fresh measures to deal with the region’s woes, especially considering the recent rumours that the ECB might also add corporate bonds to its current asset purchases programme.

Other Currencies – Highlights

The Japanese Yen lost major ground against the greenback in today’s trading session, with the US Dollar-Japanese Yen pair crossing the 111 mark. The Bank of Japan, in its monetary policy decision announced earlier today, kept its key interest rate unchanged at 0.1%. However, the central bank caught investors unaware by announcing plans to widen the nation’s monetary base at an annual pace of JPY 80 trillion, compared to JPY 60-70 trillion earlier. This move of the central bank is likely to support the nation’s consumer spending and ease deflationary threats, especially after data released overnight showed that Japan’s annual consumer price inflation eased for a fourth straight month for September. However, the monetary policy statement further revealed that the Japanese economy is on path to recovery.

With no other important macro releases today, the Japanese Yen is expected to remain under pressure against its key peers. Later today, the US Reuters/Michigan consumer confidence report will be eyed for further direction to risk appetite.