Sterling fell against the Euro and the US Dollar as UK’s inflation remained stable at 3.0%, according to data released by the Office for National Statistics (ONS). The inflation reading was 0.1% lower than what City analysts had expected, but is still a five-year high. The Governor of the Bank of England (BoE), Mark Carney, narrowly escaped from having to write a letter to Chancellor, Philip Hammond, explaining why inflation deviated more than a percentage point from the set target of 2%.

ING analysts don’t rule out a new BoE rate hike in 2018, but stress that Brexit negotiations will be a determining factor. Mark Carney, Mario Draghi, Janet Yellen and Haruhiko Kuroda who are governors of four of the world’s largest central banks are attending a European Central Bank (ECB) conference on Central Bank Communications. In the US, President Trump called for the repeal of the Affordable Care Act.

Pound Sterling – UK Markets

Today, the Pound dropped against the US Dollar with the exchange rate set just under the $1.31 mark. Sterling also dipped against the Euro with the exchange rate set at €1.11. The release of inflation data for October and Mark Carney’s speech later in the day are the main financial news today.

According to data released by the ONS, UK’s inflation in October came in at 3.0% as it had been recorded in September. City analysts had been expecting that inflation would hit 3.1%, on a year-to-year basis. Core inflation also came in lower than anticipated at 2.7%. Inflation figures were a bit below market consensus which may reduce expectations for a new rate hike by the Bank of England (BoE) in the future. The ONS report said “the inflation rate for food and non-alcoholic beverages continued to increase to 4.1%, the highest since September 2013. Rising prices for food and, to a lesser extent, for recreational goods were offset by falling motor fuel and furniture prices.”

TUC’s general secretary Frances O’Grady noted that UK household budgets are being stretched and stressed and that the Chancellor Philip Hammond should act immediately since wages are lagging behind inflation. The UK’s retail price index in October rose by 4.0%, on an annualised basis, a bit lower than expected by economists. On a month-to-month basis, the retail price index increased by 0.1%, again missing expectations.

US Dollar – US Markets

The US Dollar fell against the Euro with the exchange rate set at €0.85. The US Dollar Index (DXY) also moved lower coming in at 94.41. Janet Yellen delivered a speech at a policy panel organised by the ECB. Later in the afternoon, the Department of Labour will publish data regarding producer prices for October.

President Donald Trump interfered in the tax-reform debate back in Washington with a tweet he made from Asia. Trump wrote that he is proud of the Republicans in the House and Senate for working on the reform. However, the President invited them to repeal the Affordable Care Act (ACA) provision so the administration would have the opportunity to save money to fund the corporate tax cut. The Congressional Budget Office (CBO) has reported that scrapping Obamacare would save $338bn over the next years, but also thirteen million people more would be uninsured.

Charles Evans, the Chicago Fed President, spoke at the Central Bank Communications Conference and called for a re-evaluation of monetary policy to deal with bouts of zero interest rates in the future. Evans commented that the Fed’s board should think ahead on ways to adjust the framework. He also stressed that new policies will succeed only if the Fed hits the 2% inflation target.

Euro – European Markets

The Euro hit a three-week high against the US Dollar with the exchange rate set at $1.17. The single market currency received a boost on good news coming from the Eurozone economies.

Data released by Eurostat showed that the Eurozone’s GDP expanded by 0.6% in the third quarter, on a quarterly basis, in line with expectations. On a year-to-year basis, Eurostat data revealed that the Euro-bloc’s GDP increased by 2.5%. Industrial production increased by 3.3% in September, 0.1% more than what economists had been expecting. A survey by ZEW indicated that investors in the Eurozone are feeling optimistic regarding the economic conditions.

Germany’s GDP grew by 2.3%, in an annualised basis, in the third quarter of 2017 as analysts had anticipated. On a quarterly basis, the German GDP expanded by 0.8%, 0.2% more than the market’s estimate. ING analysts said that “even if the economy stagnates in the fourth quarter, the annual GDP growth would still be the highest since 2011.” On a year-to-year basis, October’s inflation in Germany stood at 1.6%. In the same period, Spanish inflation came in at 1.6% in line with expectations. On an annualised basis, the Italian GDP in the third quarter grew by 1.8%, a bit more than the analysts’ forecast.

Other Currencies – Highlights

Sterling edged lower against the Australian Dollar, trading at 1.71 AUD. A National Australia Bank (NAB) survey showed that business conditions in the country improved during October while business confidence remained unchanged. Westpac’s analysts noted in their report that “manufacturing business conditions surprisingly spiked, but they may well reverse in November.”

The Pound gained ground against the New Zealand Dollar, trading at 1.90 NZD. The new Tourism Minister Kelvin Davis delivered a speech in the Aotearoa Tourism Summit in which he acknowledged that this sector is one of the main contributors to the economy’s rise. Davis mentioned that the new coalition government will increase spending on tourism infrastructure and workers’ training.

Sterling lost ground against the Polish Zloty, trading at 4.73 PLN. A research by Erste Group Bank suggested that the Polish economy grew by 4.8% in the third quarter, on a year-to-year basis.