UK CPI Data on Radar
Today’s Righmove report showed that house prices in the UK dropped for November which can be attributed to tougher lending measures introduced by the BoE earlier this year. However, market focus is likely to remain on tomorrow’s consumer price inflation report, especially after the BoE downgraded inflation its forecast last week and poured cold water on hopes of an early interest rate rise in the UK.
Across the Atlantic, after Friday’s upbeat retails sales and consumer sentiment data, market participants will eye today’s US industrial production report to gain a broader insight into the nation’s macro recovery. Additionally, in the Euro zone, traders will keep an eye on the ECB President’s speech later today, particularly after the Euro zone GDP expanded for the third quarter.
Pound Sterling – UK Markets
The Rightmove report released earlier today showed that monthly house prices in the UK dropped for November. However, Sterling showed little reaction to today’s Rightmove report as market participants remained focused on tomorrow’s crucial consumer price inflation data in the UK. The report is anticipated to show a slight pick-up in the nation’s headline inflation for October. However, considering that the BoE downgraded its inflation forecast for the coming three years recently and dashed hopes of an early interest rate rise in the UK, investors will closely eye tomorrow’s inflation data for further cues. Additionally, the minutes of the latest BoE policy meeting scheduled this week will attract considerable attention. Although the minutes is not expected to provide any additional insights after last week’s dovish inflation report, traders will eye the minutes to verify if the policymakers who voted for an immediate interest rate rise stood their ground.
In Friday’s trading session, the Pound lost ground against the common currency following the release of upbeat Euro zone GDP data.
US Dollar – US Markets
The greenback failed to register gains against the majors on Friday despite the release of upbeat US macro data. Data showed that retail sales in the US rose more than expected for October due to lower gasoline prices. Additionally, the preliminary Reuters/Michigan report revealed that consumer confidence in the US improved more than anticipated for November and reached its highest level since July 2007. Considering that domestic confidence is inching back to its pre-recession high, market participants remained confident that job growth would be supported during the fourth quarter.
Today, the US Dollar is trading in a tight range against the majors ahead of industrial and manufacturing production data in the US. The report is anticipated to show a slowdown in the pace of industrial activity for October after a sharp unexpected rebound recorded for September. However, growth in industrial production is likely to strengthen prospects that the nation’s domestic activity remained resilient to subdued global economic conditions.
Euro – European Markets
In today’s trading session, macro data is anticipated to show that the trade surplus in the Euro zone widened for September. A weaker Euro might have boosted exports from the region. However a downside surprise in today’s data cannot be ruled out, particularly considering the strained trading relationship with Russia and a slowdown in emerging markets. Additionally, traders will closely eye today’s speech by the ECB Chief, Mario Draghi. Although investors expect no change in the central bank’s ultra-dovish policy stance, traders will try to gauge the scope of further stimulus measures, especially after economic activity in the Euro bloc regained some momentum for the third quarter.
The Euro gained ground against the greenback and crossed the 1.25 level on Friday. The preliminary GDP data released across key European nations revealed that two largest economies in the Euro bloc, Germany and France, avoided a recession for the third quarter. Additionally, the Euro zone GDP report showed that the pace of economic growth improved unexpectedly for the third quarter, raising hopes that the downward macro trend in Europe might be losing momentum.
Other Currencies – Highlights
The Japanese Yen gained ground against the greenback in today’s trading session despite the preliminary GDP data showing an unexpected contraction in Japan’s economy for the third quarter. Although the GDP report revealed that growth in domestic consumption was moderate, a contraction in the nation’s economy was mainly contributed by a drop in the nation’s business inventories for the third quarter. With the Japanese economy slipping into a recession, market speculation has strengthened that the government might delay the timing of the next sales tax hike.
With the Bank of Japan scheduled to hold its monetary policy meeting later this week, the Japanese Yen is likely to witness some volatility against its key peers. Additionally, market participants will keep a tab on the latest FOMC minutes and consumer price inflation data in the US due later this week for further direction to risk appetite.