Eurozone inflation: Vigorous
Dominic Raab, Brexit Secretary, tried to instill confidence in a Brexit deal being done and that last week’s Salzburg Summit should be overlooked. New Labour Party proposals and a new Brexit blueprint from the The Institute of Economic Affairs, supported by many leading Brexiteer MPs, only added to political confusion in the UK. Brexit rhetoric failed to soothe the unease and markets remain doubtful of the negotiation status, and fear of failure continues.
CBI industrial trends dropped to -1 in September, still above the long-term average, but well short of the forecasted 5 and July’s 7. Sterling was viewed as underpriced following Friday’s sell off and gained some ground during the morning, peaking above 1.3150 against the Dollar before falling away to near 1.3100 and the Euro retreated to near 1.1160. There is no no economic data today, but the Bank of England’s Gertjan Vlieghe is slated to speak this morning.
The US Dollar is largely unchanged today as the market keeps watch over the Greenback ahead of this week’s interest rate announcement. The money markets are pricing based on expectations of almost a 100% probability the will FED raise interest rates by 0.25%.
The Chicago Fed National Activity index was unchanged from the revised reading of 0.18 for August and close to consensus forecasts which had a little overall market impact. The dollar gained some fresh backing amid expectations of a hawkish Federal Reserve stance in Wednesday’s policy statement with the current USD/EUR just below 1.1750.
President Draghi’s speech yesterday caused the Euro Dollar to rise above the 1.1800 mark with comments he made seemingly confirmed there was a “relatively vigorous” increase in underlying inflation. He confirmed increases in wages is predicted to continue and interest rates will remain unchanged through the summer of 2019.
German IFO business data came out lower than expected but still above consensus, pushing the currency upward slightly. German 10 year yields ended up at their highest levels since June.
There is relatively little economic data due out today, with the German wholesale price index being the most significant. What may be of interest today however are the speeches given by the ECB’s Praet and Coeure and the UK’s MPC Member Vlieghe.
Data to watch:
08:10 EUR ECB’s Praet Speech
08:40 GBP MPC Member Vlieghe speech
12:00 EUR ECB Cœuré Speech
13:00 USD Housing Price Index (MoM) (Jul)
13:30 EUR ECB’s Praet Speech
14:40 EUR ECB Cœuré Speech