Today, all eyes will be on key US economic reports which are scheduled for release later today. The probability of a Federal Reserve interest-rate increase in 2015 has diminished amid new signs of anemic economic activity, while some of the key Fed officials have maintained their view that the timing for a lift-off will be right this year. Amid heightened speculation over the timing of the Fed rate rise, market participants focus today will be primarily on consumer price inflation and jobless claims data in the US to gather evidence whether the economy is strong enough for a modest rate increase in the near term.

Meanwhile, there is little economic data of significance both in the UK and the Euro area.

Pound Sterling – UK Markets

After an initial negative reaction, the Pound – US Dollar currency pair surged above the 1.54 mark yesterday as the UK labour market report relayed both positive and negative signals. On the positive side, Britain’s unemployment rate unexpectedly fell to its lowest level in more than seven years for the three months to August. On the negative side, the number of people claiming jobseeker's allowance soared, warranting caution about how much the unemployment rate can still fall in the coming months. Investor focus was also on wage growth figures that did not pick up as expected for the three month period until August. However, recovery in pay coupled with no inflation should encourage households to boost their spending ability and the underlying positive trend in wage growth is in line with views that a case for a BoE interest rate rise is building.

In the absence of notable macroeconomic indicators in the UK today, traders will eye key US economic reports due later in the day for direction in the currency pair.

US Dollar – US Markets

It is a busy economic calendar day in the US today, with markets expected to focus more on CPI data for September, scheduled later in the day. Inflation has persistently run below the Fed’s 2% target. A Labour Department report yesterday indicated that a renewed drop in gasoline prices contributed the most to a decline in producer prices in the US last month. In addition to lower oil prices, price pressures have also been accentuated by a stronger US dollar. Markets anticipate that today’s CPI update will show that the US economy slipped into deflation again in the previous month, further pushing back expectations of a Federal Reserve interest rate rise this year.

Besides the CPI report, a weekly update on jobless claims and an early read on US manufacturing activity for October through a pair of two updates from the regional Fed banks due today would keep currency traders busy. The weekly claims data is not expected to alter the views of a strengthening US job market, while the Fed regional surveys are anticipated to continue to display weakness in the US manufacturing sector.

Euro – European Markets

The Euro – Pound currency pair earlier today slipped below the 0.74 mark this morning, extending yesterday losses following domestic data which had showed that Euro zone’s industrial production slumped in August. The weak figures are expected to add to pressure on the ECB to expand its aggressive easing programme when it meets next week. Also, an unexpected drop in the UK unemployment rate stoked a Sterling rally yesterday. Meanwhile, till now aiding the common currency was the ongoing weakness in the US Dollar. However, the Euro has now nudged lower against the US Dollar this morning. Amid lack of influential domestic economic data, inflation figures and jobless claims data in the US scheduled later today could trigger volatility in trading in the Euro – US Dollar currency pair.

Going forward, Euro zone’s consumer price inflation and trade data due tomorrow will be of significance. Sentiment in the financial market, market moving news in the major economies and any news from the ECB could also influence trading in the Euro against its key peers.

Other Currencies – Highlights

The Aussie Dollar is currently trading on a stronger footing against the greenback, as sentiment towards the US Dollar continues to remain subdued in the aftermath of weak US retail sales data yesterday which might have prompted investors to push back their expectations of the US Federal Reserve increasing its benchmark interest rate by the end of this year. However, earlier today, the Australian Dollar had briefly dipped against the US Dollar following the release of mixed Australian economic reports. Official figures revealed that jobless rate remained stable at 6.2% for September, defying expectations of a rise in the number of jobless people as the resource rich economy moves away from its dependence on the mining sector. However, the number of Australian jobs fell sharply in the previous month for the first time since April 2015, with data showing decrease in full time employment and rise in part time work.

Separately, the Melbourne Institute reported that consumer expectations of the annual pace of inflation lifted in October.