UK inflation in September came in at 3.0%, according to data published by the Office for National Statistics (ONS), regarding the country’s economic activity. This is the highest inflation figure recorded since April 2012 and has fed the expectations for a Bank of England (BoE) rate hike in November. British pensioners are the most benefitted since their pensions will rise faster than wages next years, thanks to the triple-lock system. Unfortunately, real wages are still getting squeezed and small businesses expected a rise in business rates in 2018.

In the US, President Trump reiterated that he wants to see the tax reform materialising until the end of the year. Investors cheered when a Bloomberg report said that John Taylor is the prime candidate for replacing Janet Yellen as the Fed’s Chair. Taylor is in favour of higher interest rates than the current ones. In the Eurozone, Eurostat data showed that inflation remained stable at 1.5% in September. Core inflation rose unexpectedly to 1.3%, on an annualised basis.

Pound Sterling – UK Markets

Today, Sterling retained its value against the US Dollar with the exchange rate set at $1.32. The Pound also jumped against the Euro with the exchange rate set at €1.12. Inflation figures as well as data regarding retail and producer prices released by the ONS dominated the news.

According to the ONS, UK inflation in September came in at 3.0%, on a year-to-tear basis, in line with City analysts’ expectations. The figure was up from August’s 2.9% reading and represents a 5 1/2 year high. Inflation on a monthly basis came in at 0.3% as it was anticipated. Core inflation in September came in at 2.7%, on an annualised basis, which is 0.1% lower than what markets were expecting. UK inflation was driven up by rising prices for food and recreational goods, along with transport costs.

The Producer Price Index (PPI) for output, on a monthly basis, rose by 0.2% below expectations. Another disappointing figure was the one the Producer Price Index for input, on a month-to-month basis, which came in at 0.4%, although City market experts believed that it would rise by 1.2%. The Retail Price Index (RPI) rose by 3.9% in September, on an annualised basis. The result made the Federation of Small Businesses (FSB) issue a statement which said its members face a 3.9% increase in business rates next year, noting that “the increase, coming on top of losing year one transitional caps, will be the last straw for many business owners.”

US Dollar – US Markets

The US Dollar jumped against the Pound with the exchange rate set at €0.85. The US Dollar Index (DXY) rose, coming in at 93.49. The Dollar’s value increased for a second day on expectations that the tax reform will be concluded until the end of the year and that John Taylor is the prime candidate for becoming the next Fed Chairman.

A Bloomberg report revealed that John Taylor “impressed” President Donald Trump in an interview for the Fed Chair candidacy. Taylor is a Stanford university professor of economics and the mind behind the “Taylor rule,” which is a forecasting model used to determine what interest rates should be as the economy is going through changes. Taylor’s rule advocates that in the current US economic conditions, interest rates should be much higher than the existing 1.0-1.25%. Trump is going to interview Janet Yellen on Thursday.

Donald Trump repeated that he wants to see the tax reform bill passed by the end of this year. “I really believe that we have a very good chance of getting the taxes done…hopefully fairly long before the end of 2017,” noted Trump. The President met with the Senate Majority leader Mitch McConnell, who said that the Senate needs to pass a fiscal 2018 budget resolution during this week. President Trump stressed that he would like to see some minor adjustments on the reform bill in order to “make sure that the middle class is the biggest beneficiary.”

Euro – European Markets

The Euro kept falling against the US Dollar for a second day with the exchange rate set at $1.17. Data regarding Eurozone inflation were released by Eurostat.

Eurozone’s inflation in September remained stable at 1.5%, on an annualised basis, as it was expected by economists. On a month-to-month basis, inflation came in at 0.4%, a small rise from August’s 0.3% figure. Core Eurozone inflation rose to 1.3%, beyond what analysts were anticipating. In Germany, the ZEW survey, regarding the economic sentiment of investors, recorded an unexpected drop for October. According to the survey, investors feel more pessimistic about the current economic situation now, than in September.

In Spain, Carles Puidgemont has two more days to clarify if he is going to declare Catalonian independence, after Mariano Rajoy set a new deadline yesterday. However, the Spanish government already made a move against the separatists by putting in jail two of their leaders because they organised demonstrations ahead of the 1st October referendum. In Italy, a report by the National Institute of Statistics showed that the global trade balance in August dropped by €3.8bn, totally missing market expectations.

Other Currencies – Highlights

Sterling continued gaining ground against the Australian Dollar, trading at 1.68 AUD. The Reserve Bank of Australia (RBA) minutes didn’t include any surprises. The RBA’s policymakers said that any change in interest rates would depend on local economic conditions. They noted that the hike of interest rates in countries abroad doesn’t cause any direct implications in the Australian economy. The Aussie dropped when traders realised that the RBA isn’t going to follow the footsteps of other central banks across the globe.

The Pound fell against the New Zealand Dollar, trading at 1.84 NZD. Data released by Statistics New Zealand showed that inflation rose to 1.9% in the third quarter of 2017, on a year-to-year basis. The result was slightly above analysts’ expectations and was driven by an increase in house, insurance and food prices. The Kiwi’s value increased right after the announcement, but, according to a report by TDS, gains are capped by political uncertainty.

Sterling jumped against the Swiss Franc, trading at 1.29 CHF. The chairman of the Swiss National Bank (SNB), Thomas Jordan, said that the SNB remains committed to its expansive monetary policy, despite recent upward pressure on the Swiss Franc.