Data just released has indicated an easing trend in UK annual consumer price inflation for September. The economic report has done little to alter the market view that the BoE might keep its key interest rate at current levels for a prolonged period, especially after yesterday’s dovish tone from the BoE Governor, Mark Carney. He warned that a slowdown in the Euro zone economy might weigh on Britain’s monetary policy decision. Against this backdrop, markets will keep a tab on today’s ZEW survey in the Euro zone and Germany as it might help investors to determine the severity of macroeconomic troubles in the region.
Across the Atlantic, today’s NFIB report is expected to show a deterioration in confidence among small businesses for September.
Pound Sterling – UK Markets
Data just out has revealed that annual consumer price inflation in the UK eased more than expected for September due to the recent decline in oil prices. As a result, the Pound has dropped against the majors this morning and is trading below the 1.60 mark against the greenback. Although the easing trend in UK inflation has raised concerns among investors, markets will eye tomorrow’s domestic labour market report for better insights into the nation’s macroeconomic health.
Dovish comments from the BoE Chief, Mark Carney, led Sterling to trade under pressure against its major peers in yesterday’s trading session. He stated that weakness in the Euro zone economy, along with a slowdown in global growth, might affect the central bank’s monetary policy decision. With the BoE Governor sounding more dovish on the policy front than he has in recent months and considering the recent NIESR report indicating a slowdown in Britain’s economy, market speculation has heightened that the central bank might delay the timing of its interest rate rise.
US Dollar – US Markets
Amid a quiet day in terms of economic releases yesterday, the greenback lost ground against the common currency following dovish comments from the Federal Reserve Bank of Chicago President, Charles Evans. He suggested that the central bank should not raise interest rates sooner than expected as it might pose a major threat to the economy. He further urged the US government to take the benefit of lower borrowing costs and increase infrastructure investments, as it is likely to bring the central bank closer to its inflation and employment targets.
Meanwhile, the US Dollar is trading in a tight range against the Euro this morning. The only noteworthy domestic economic release today is the NFIB small business optimism report which is expected to show that morale among small firms deteriorated for September. With small businesses playing a vital role in boosting jobs growth earlier this year, a slowdown in business activity is likely to raise concerns among investors. Moving ahead, market participants will keep a tab on tomorrow’s crucial retail sales data which is expected to a show a decline for September.
Euro – European Markets
Data released earlier today revealed that consumer price inflation in key European nations remained soft for September, although the numbers were broadly in line with market estimates. The Euro has shown little reaction to today’s economic data, as markets await the crucial ZEW survey scheduled later today to gauge the macroeconomic conditions in Germany and the Euro zone for October. Although markets are expecting further deterioration in economic sentiment, the survey might help investors to assess the depth of weakness in Europe for the early fourth quarter. Additionally, the Euro zone industrial production data scheduled later today is anticipated to show a decline in the region’s industrial activity for August.
The Euro was broadly firmer against both the Pound and the greenback yesterday. Meanwhile, the German Bundesbank President, Jens Weidmann, urged individual Euro zone governments to pursue structural reforms. With the ECB and Germany at loggerheads in terms of the amount of additional stimulus needed for the Euro zone economy, the ECB President’s comments tomorrow will be keenly eyed.
Other Currencies – Highlights
The Aussie Dollar is trading lower against the greenback this morning after data released earlier today showed that business confidence in Australia weakened for September. Although the report expressed confidence in the nation’s construction sector, it downgraded the outlook for the Australian mining sector. This has led market participants to exercise caution, especially after the Reserve Bank of Australia Governor, Glenn Stevens, raised concerns earlier by indicating that more business investments are needed in the non-mining industry. Additionally, the RBA assistant Governor, Guy Debelle, stated yesterday that the elevated value of the Australian Dollar is offering less assistance in achieving a balanced growth in the Australian economy.
With little on the domestic economic front today, markets will keep a tab on tomorrow’s Westpac consumer confidence survey in Australia and US retail sales data for further direction to the Aussie Dollar-US Dollar pair.
Euro and Pound Sterling Recover Modestly on Friday
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance
Soft CPI Data, Lack of Progress in Brexit Talks Hurt Pound Sterling