Today’s employment data has revealed that the number of jobless claimants in the UK continued to decline for September, albeit at a slower pace. This should provide some relief to Sterling investors, especially considering yesterday’s weak UK consumer price data which showed a more than expected drop for inflation. However, with recent mixed economic data in the UK, the prospects of a delay in an interest rate rise cannot be ruled out. In the Euro zone, a speech from the ECB Chief later today will be closely watched to gauge the prospects of further stimulus measures in the region.
Across the Atlantic, today’s retail sales numbers could spur some volatility in the greenback against the majors.
Pound Sterling – UK Markets
Sterling has remained range bound against its major peers this morning. Data just out has shown that the unemployment rate in the UK dropped more than expected to 6% for the three months ended August and growth in wage earnings surpassed market expectations. Additionally, the number of people claiming jobless benefits in the UK continued to drop for September. However, with Britain’s inflation growing at a stronger pace compared to earnings growth in the nation, it remains to be seen what measures the BoE adopts in the future to bridge this gap.
In yesterday’s trading session, the Pound lost ground against the greenback and dropped below the 1.60 mark following poor consumer price inflation data in the UK which heightened uncertainty among market participants over the timing of an interest rate rise in the nation. With the BoE Governor recently indicating that softness in the Euro zone economy is likely to affect the nation’s monetary policy decision, a speech from Martin Weale, a BoE official, due later today will be closely eyed to gauge the prospects of a delay in an interest rate rise.
US Dollar – US Markets
The greenback is trading in a tight range against its major peers in today’s trading session. Data scheduled for release later today is anticipated to show a drop in US retail sales for September. However, after excluding sale of automobiles, retail sales is expected to grow at a similar pace as that of the previous month. However, any downside surprise from today’s retail sales figures could severely dampen expectations of an interest rate rise in the US next year, particularly after various US Fed officials raised concerns about weak inflation lately. Today’s producer price inflation figures will also be watched to ascertain the price trend for September.
The US Dollar gained ground against the Euro and the Pound in yesterday’s trading session following weak macro reports in the UK and the Euro zone. Meanwhile, data from NFIB showed a more-than-expected drop in the US small business optimism index for September, raising doubts about an overall recovery in the US economy. Additionally, the San Francisco Fed President, John Williams, stated that more bond buying might be needed, if the economy falters.
Euro – European Markets
In the midst of mounting fears over stagnation in Euro zone growth, the German government slashed its growth forecast on the economy for the current year and next. This has further elevated concerns that Germany might indeed be heading towards a recession. Meanwhile, data released earlier today showed that consumer price inflation in Germany remained in line with the preliminary estimate for September. However, the Euro showed little reaction to the report, as investors remained focused on a speech from the ECB Chief, Mario Draghi, scheduled later today. Although comments from the ECB President are likely to remain dovish, traders will look for hints related to further stimulus measures, especially after some ECB officials firmly voiced their opposition for a sovereign debt purchase programme by the central bank.
In yesterday’s trading session, the common currency dropped below the 1.27 mark against the greenback. The German ZEW survey showed a more than anticipated drop in investor confidence for October, stoking fears that weakness in the nation might persist during the fourth quarter.
Other Currencies – Highlights
The Japanese Yen trading weaker against the greenback in today’s trading session after data released earlier today showed that industrial production in Japan declined at a faster than anticipated pace for August. Weak domestic demand and a fall in exports were the major reasons for a substantial drop in the nation’s industrial production. With domestic industrial activity showing no signs of improvement, prospects are strengthening that the April sales tax hike has left a deeper dent on the nation’s macroeconomic health.
With no other important economic releases in Japan today, the Japanese Yen is likely to take direction from US retail sales data. Moving ahead, the US Fed Chairperson’s speech and the Reuters/Michigan consumer sentiment survey due this Friday are expected to generate considerable attention and keep investors in the US Dollar-Japanese Yen pair on their toes.