Yesterday’s hawkish comments from the BoE MPC member, Martin Weale, provided little support to the Pound against the majors. Sterling briefly rose above the 1.60 mark against the greenback following weak US retail sales data, but found it difficult to remain supported at that level due to the mostly mixed UK labour market report released earlier yesterday.
With no crucial economic data in Britain today, investors have shifted their focus to industrial production data in the US. Market participants expect this to rebound for September. Any upswing in these numbers might prove crucial in reinstating confidence among investors, particularly amid concerns that a global slowdown might be weighing on the US economy.
Pound Sterling – UK Markets
The Pound traded under pressure against the Euro while being pretty volatile against the US Dollar in yesterday’s trading session. Data showed that the unemployment rate in the nation touched its pre-recession low for the three months ended August. However, the number of people claiming jobless benefits in the UK declined at a slower than expected pace for September. In the light of a recent slowdown in consumer price inflation in Britain, prospects are strengthening that the pace of economic recovery in the nation might be slowing. However, the BoE Monetary Policy Committee member, Martin Weale, indicated that he will continue to vote for an immediate interest rate rise and opined that the central bank should ignore the recent dip in inflation while setting interest rate policy and place greater weight on the speed of economic recovery and falling unemployment.
With no major economic data scheduled in the UK today, Sterling is anticipated to track global news flows for further direction. Additionally, a speech from Jon Cunliffe, the Deputy Governor for financial stability at the BoE, due later today will be eyed by traders.
US Dollar – US Markets
The greenback lost ground against the common currency in yesterday’s trading session following the release of a downbeat US retail sales report. Data showed a more than expected drop in the nation’s retail sales for September, stoking concerns that domestic consumer morale might be deteriorating. Additionally, another report showed that producer price inflation in the nation eased unexpectedly for September, adding to fears that the nation’s inflation is easing, especially after several US Fed officials expressed concerns recently.
Today, industrial production data in the US will be keenly eyed and is expected to show an increase for September, thereby reinstating confidence among investors that the nation’s manufacturing activity might remain immune from subdued global conditions. Additionally, US initial jobless claims for the previous week is expected to remain below the 300K mark for the fifth straight week, strengthening expectations that the nation’s labour market growth remains robust during the initial phase of the fourth quarter. Furthermore, speeches from various US Fed officials will generate considerable market attention later today.
Euro – European Markets
Today’s notable economic releases in the Euro zone consists of the revised inflation numbers for September and trade balance figures for August. The final inflation reading is anticipated to remain in line with the flash estimates. However, a downside surprise in data is likely to stoke concerns about the persistent deflationary threat in the Euro zone and provide more ammunition to the ECB Chief in his debate against Germany’s austerity. Additionally, considering the recent fall in crude oil prices, market participants are expected to keep a tab on macro data going forward to ascertain its impact on the region’s deflationary prospects. Separately, the non-seasonally adjusted trade balance is expected to show a sharp reduction in trade surplus, as exports from key European nations remain under pressure.
The common currency gained ground against the majors in yesterday’s trading session and rose above the 1.28 mark against the greenback following weak US retail sales data. Meanwhile, the ECB Chief, Mario Draghi, in his speech yesterday, offered no hints about the central bank’s next policy move.
Other Currencies – Highlights
The Kiwi Dollar gained ground against the greenback in yesterday’s trading session and breached the 0.79 level after the release of weak US retail sales and producer price inflation data. Additionally, data released late yesterday showed that the pace of manufacturing activity in New Zealand improved for September. The report further revealed that the hiring pace in the nation improved last month and domestic activity remained well supported by the construction sector.
With little on the domestic macroeconomic front, the New Zealand Dollar is likely to take direction from US industrial production data due later today. Additionally, markets will keep a tab on speeches from a few voting members of the US policy setting committee for further direction to risk appetite.
Pound Sterling Fails to Capitalise on Cabinet's Support for Brexit Deal
British Pound Rises as PM May Calls Cabinet Meeting on Brexit
The US Dollar Continues to Strengthen Against European Currencies