With a light global economic calendar today, currency markets are unlikely to witness any major volatility. The minutes of the BoE’s latest policy meeting will be keenly scrutinised later this week for more details about the central bank’s future stance, along with the preliminary third quarter GDP numbers scheduled on Friday. In the Euro zone, the soft German producer price inflation report released earlier today has confirmed that the prospect of deflation continues to cause concern.
Across the Atlantic, the US Fed Chief’s comments on Friday provided no hints to the central bank’s next policy move. Going forward, market participants will remain focused on tomorrow’s GDP numbers in China to reassess their appetite for risk.
Pound Sterling – UK Markets
The Pound briefly climbed above the 1.61 mark against the US Dollar in Friday’s trading session. However, expectations of an interest rate rise in the UK continue to subside. The BoE Chief economist, Andrew Haldane, stated that the timing of an interest rate rise in Britain is likely to be delayed, as a weak global economic environment and a softness in domestic wage growth remain a major concern for policymakers. However, investors will keep a tab on the minutes of the latest BoE policy meeting scheduled later this week to gain a better insight into the central bank’s policy stance going forward. Additionally, traders will scrutinise the minutes to gauge views of policymakers on threats posed to the British economy due to a slowdown in the Euro zone.
The Rightmove report released over the weekend revealed that house prices in the UK continued to grow at a robust pace for October. With no major domestic macro triggers today, Sterling is trading in a tight range against its major peers this morning. Traders will keep a close watch on Friday’s preliminary UK GDP estimate for an insight into economic growth during the third quarter.
US Dollar – US Markets
The US Dollar began the weekly trading session on a stronger footing and gained traction against the Euro and the Japanese Yen. However, in the midst of persistent fears of a global economic meltdown, market participants are likely to keep a close watch on incoming domestic and overseas economic releases for further clarity on the future prospects of the US economy. On Friday, the US Fed Chief, Janet Yellen, offered no fresh cues over the timing of an interest rate rise. Separately, the preliminary Reuters/Michigan report for October showed that consumer confidence improved unexpectedly to the highest level since August 2007.
Going forward this week, the consumer price inflation report for September will be closely watched, as falling inflation expectations has stoked speculation that the Fed might maintain an ultra-loose policy stance in the near future. Moreover, a downside surprise in CPI figures cannot be ruled out, given the unprecedented slide in global oil prices lately.
Euro – European Markets
Data just out revealed that the annual producer price inflation in Germany for September declined to its lowest level since February this year. Benign price environments in the Euro zone continue to stoke fears about the common currency bloc sliding into a deflationary spiral in the near future.
The common currency lost ground against the majors in Friday’s trading session. The ECB Vice President, Vitor Constancio, warned that any further downward pressure on Eurozone inflation expectations could be extremely harmful, while another ECB official, Benoit Coeure, indicated that Europe’s largest economy might be slipping into a recession. Dovish comments from ECB officials highlight that the central bank might be inclined to pursue an accommodative stance for a prolonged period. Meanwhile, traders are likely to keep a tab on this week’s preliminary PMI numbers across key European nations to monitor trends in the private sector during the initial phase of the fourth quarter.
Other Currencies – Highlights
The Japanese Yen is trading on a weaker footing against the greenback this morning. The final report from the Cabinet Office released earlier today showed a downward revision to the coincident index in Japan for August. However, the Bank of Japan Governor, Haruhiko Kuroda, stated that the Japanese economy is expected to recover moderately, as the impact of the April sales tax hike is gradually subsiding. However, it remains to be seen whether the optimistic view of the BoJ Governor actually reflects in Japan’s economic data going forward.
With little on the domestic macroeconomic front today, the Japanese Yen is unlikely to witness any major volatility. Going forward, this week’s US consumer price inflation report along with Japan’s manufacturing PMI will be some important macro triggers to provide direction to the US Dollar-Japanese Yen pair.
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The Pound continues to weaken following disappointing UK retail sales data