UK CPI Remains Negative in October
The pace of global economic releases has picked up today, with inflation data in the UK and the US taking the limelight. The Bank of England (BoE) is more likely to retain its current monetary policy stance for an extended period as the CPI print that came in just now indicated that Britain remained in deflationary territory for a second straight month in October. Across the Atlantic, the US CPI reading is expected to show a slight rebound in October, which will confirm that the FOMC is on course to achieve its targets and fuel expectations of an increase in the benchmark interest rate next month.
In Europe, November’s ZEW economic sentiment surveys are scheduled for release in Germany and the wider Euro zone today.
Pound Sterling – UK Markets
Sterling has recovered from some of its earlier losses against the US Dollar. Meanwhile, the just published UK’s inflation rate remained in negative territory and in line with expectations for October. Price pressures were absent for the second consecutive month as a combination of falling commodity prices, from oil to food and the effects of a strong Pound, which makes imports cheaper held the inflation rate lower. However, the core measure of consumer prices ticked higher than market estimates for the previous month. Earlier this month, the BoE had left its interest rates steady, but lowered the nation’s economic growth outlook for current year. For the BoE, today’s headline CPI reading, downwardly revised growth outlook and an uncertain picture for global growth means that there is little imminent pressure to raise borrowing costs from a record low anytime soon.
Moving ahead, Britain’s retail sales data is due on Thursday and after a stunning print last month, the reading for October is anticipated to show a easing in retail sales growth which could further stoke growth fears
US Dollar – US Markets
The greenback is trading broadly higher across the board this morning, with the Euro – US Dollar currency pair trading close to monthly lows as markets continue to assess the impact of renewed geopolitical risks in the Euro zone. Also, a slew of notable economic releases in the US including consumer prices data due later today will be under the spotlight as the FOMC is expected to begin the monetary policy normalisation process at next month’s meeting. Today’s consumer prices data for October will be amongst the first of two updates on inflation ahead of the Fed’s interest rate decision meeting in December. Expectations are for the US consumer prices to rebound at the start of the fourth quarter and the core CPI, which excludes the effects of lower energy and food prices to remain steady in the previous month.
Later today, investors will also keep a tab on the September figures of US industrial production followed by the November survey report for home-builders. Industrial output is expected to have bounced back in October and the NAHB index is forecast to hold steady at last month’s highs.
Euro – European Markets
This morning, the Euro continues to face downside pressure against the major currencies, as markets remain wary about the Euro zone’s economic growth outlook following multiple terror attacks in Paris during the weekend which has subsequently fuelled the belief that the European Central Bank will introduce further stimulus easing measures in order to induce growth in the economy. At the same time, expectations of a December rate rise by the US Federal Reserve (Fed) have boosted the US Dollar, which is also heavily weighing on the Euro – US Dollar currency pair.
In a short while, investors will track the economic morale data in Germany and the Euro zone, both of which have been sliding lower in the past few months. This deteriorating trend in the ZEW’s expectations component for both Germany and Europe is anticipated to show a slight improvement for November. However, an index measuring German’s current situation is expected to edge modestly lower. Also, a raft of key US economic data releases later today will be eyed by investors to gauge the trading direction in the pair.
Other Currencies – Highlights
The Aussie – US Dollar currency pair experienced a minor upside rally earlier today following the publication of minutes of the Reserve Bank of Australia’s (RBA) November monetary policy meeting. The RBA meeting minutes’ unveiled mixed signs, with the central bank offering some scope for further easing but at the same time expressing optimism about Australia’s economic growth outlook. The board members noted that they were concerned regarding the slowdown in emerging markets, particularly in China, while at home weak wages and continued decline in mining related investments remained the red spot on growth outlook. However, the RBA also added that the depreciation of the Australian Dollar had provided support to the economy which was particularly apparent in the sizeable contribution to growth from net services exports over the year.
Currently, the RBA minutes induced gains in the currency pair has faded. Investor focus will now shift towards the upcoming US inflation data for further direction. Going forward, prospects of a December Fed rise will be confirmed by the FOMC minutes due tomorrow.