With no crucial economic releases in the UK today, investors are likely to focus on Wednesday’s publication of the minutes from the BoE’s last policy. It remains to be seen whether some of the BoE officials continued to vote in favour of an immediate rise in the nation’s interest rates.
Across the Atlantic, the US Fed Chief’s speech will be closely watched in order to monitor if Janet Yellen voices support to keeping monetary policy loose over a prolonged period in the midst of dampening outlook for growth in the global economy. In the Euro zone, the preliminary PMI numbers across key European nations scheduled for release next week will help investors gauge if the macro trend in the region continues to weaken.
Pound Sterling – UK Markets
The Pound gained ground against the Euro yesterday, after bond yields in a few second tier European nations increased. This was a relief to Sterling investors, particularly after the Pound had experienced pressure due to this week’s lower than expected consumer inflation in the nation.
With little on the domestic macroeconomic front today, Sterling is trading in a tight range against the majors. The Dollar-Pound pair is expected to take direction from the US Fed Chair’s speech later today. Market participants await clarity on the future course of monetary policy in the US, given the steadily diminishing possibility of an earlier than expected interest rate rise in the US. Moving ahead, the minutes of BoE’s policy meeting for October, scheduled for release next week, will be tracked to see if few of the MPC members continued to back calls for higher interest rates in the nation despite signs of fatigue in the UK economy. Besides, UK’s third quarter GDP reading will help to asses if the persistent geopolitical tensions in Ukraine and a slowdown in Europe has weighed on the nation’s economic growth.
US Dollar – US Markets
Dovish comments by James Bullard, a key Fed official and a renowned hawk, surprised market participants yesterday. He suggested that the central bank should consider delaying the end of its bond purchase programme, as the recent drop in the domestic inflation expectations and a slowdown in Europe is likely to weigh on the US economy. Economic data released in the US yesterday indicated a better than expected reading on industrial production, while the number of jobless claimants remained below the 300K mark for a fifth straight month. Despite positive data, Bullard’s comments caused the greenback to lose ground against the Pound yesterday.
The preliminary Reuters/Michigan consumer confidence report is the only notable economic release in the US today. This report is expected to show that consumers’ confidence slightly deteriorated for October, but remained close to its pre-recession highs. Additionally, investors will keenly follow today’s speech by the US Fed Chair, Janet Yellen, especially in light of concerns raised by several Fed officials recently about weakening inflation.
Euro – European Markets
The Euro lost ground against the Pound yesterday, despite a report released in the Euro zone indicating an upward revision in the core inflation rate for September. The headline inflation for the month remained unchanged from the preliminary reading and lower from the reading in August. While the core inflation data is comforting, concerns about a deflationary threat in the Euro zone continue given the broader macroeconomic trend indicating that recovery in the region is slowing.
With no domestic economic releases scheduled today, the Euro is trading in a tight range against the majors this morning. Today’s speech by the US Fed Chief will be crucial in providing further direction to the Euro-US Dollar pair, particularly after a Fed official yesterday supported prospects of continuation in the central bank’s quantitative easing measures. Going ahead, next week’s preliminary PMI readings across key European nations will be an important gauge to help market participants verify whether the Euro bloc’s macro troubles are showing any signs of easing.
Other Currencies – Highlights
The Canadian Dollar reversed its early session gains against the greenback in yesterday’s trading session, after data revealed that manufacturing shipments in Canada dropped at a stronger than anticipated pace for August. Market participants expect today’s Canadian consumer price inflation report to show a slight ease in the nation’s annual inflation rate for September. However, inflation figures could hold a negative surprise, given the sharp slide in global commodity prices witnessed lately.
The Canadian Dollar could witness some volatility against the greenback in the latter half of the trading session, as the US Fed Chair, Janet Yellen, is scheduled to speak today. During the course of next week, market participants will keep a tab on the BoC post meeting monetary policy statement for further direction to the Canadian Dollar.
US Dollar Continues to Outperform European Rivals
Pound falls further
British Pound Suffers Losses Ahead of Tuesday's Critical Vote