The UK’s inflation benchmark CPI declined 0.2% for October and the annualised rate dropped to 1.5% from 1.7%. Core inflation printed in line with market expectations, unchanged at 1.7% but the Sterling reaction to the data was limited. Equity markets fell on concerns over the trade outlook and weaker global risk also constrained Pound progress.
Nigel Farage stated that the Brexit party would not withdraw any further election candidates which also curbed potential Sterling support slightly, although the polls continued to show a solid Tory lead. The Pound consolidated near 1.2850 on the Dollar and the Euro tested 6- month lows near 1.1682.
Fragile risk appetite and a plea from the departing EU Council President Donald Tusk for the UK to vote against Brexit triggered fresh political uncertainty and Sterling is a little weaker on opening. UK Retail sales figures are due out this morning.
San Francisco Fed President Daly stated that the Fed is fixated on getting inflation higher. In prepared remarks to the congressional Joint Economic Committee, Fed chair Powell declared that the current stance of monetary policy is likely to remain appropriate as long as the incoming economic data is consistent with the economic standpoint. There were, nonetheless, also comments that the committee will respond accordingly if there are material changes while persistent low inflation may lead to a slide in longer-term inflation expectations. The rhetoric had only limited market impact as speculation over further rate cuts in 2020 persisted.
The selling momentum around the Euro remains unabated and dragged the common currency to fresh multi-week lows in the 1.0990 region against the Dollar yesterday. The bearish note surrounding the pair, which finally breaking below the 1.10 key figure. Looks like it could be around for a while due to solid USD-dynamics, some dovish ECB-speak and fresh trade concerns.
The Euro however, at least managed to halt the daily downside after the German economy avoided entering into recession in the third quarter. The GDP expanded 0.1% during the third quarter and 1.0% on a yearly basis, both prints surprising to the upside.
As of writing, the Euro is trading at 1.1006 against the Dollar.
Data to watch
07:00 – EUR – German Prelim GDP
09:30 – GDP – Retail Sales
13:30 – USD – PPI
13:30 – USD – Core PPI
15:00 – USD – Fed Chair Powell Testifies
16:00 – USD – Crude Oil Inventories