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Mark Carney has the markets in the palm of his hand

Mark Carney has the markets in the palm of his hand

Yesterday morning bore witness to better than expected data from the UK. The Average Earnings Index 3m/y printed better than analyst expectations of 2.3%, although the figure was down from the previous month’s 2.5%. The Claimant Count increased by 2.4K – a minor jump. The claimant count rate remained steady at 2.2% – the same as June.

The impact of Brexit on employment seems to be nothing to worry about as headline UK unemployment remains at eight-year lows of 4.9%. Sterling edged slightly higher following the data before dipping lower during the New York session as oil prices fell.

Today there is retail sales data from the UK, with general consensus expecting a -0.4% figure. All eyes today will be on the Bank of England’s Monetary Policy Committee (MPC) meeting, however. There are strong expectations that the Bank of England (BoE) will leave policy unchanged in the meeting. The summary and forward guidance will be watched very closely for clues on whether the bank still thinks a further cut in rates is likely this year.

The Euro strengthened against the Pound during yesterday’s European trading session, hitting the highest level since August 30th despite another quiet data day from the Eurozone. Inflation figures from the Single Market will be the highlight of the day for the single currency. However the impact will likely be muted due to recent flash estimates and news from elsewhere.

The Dollar emerged from a quiet data week yesterday with import prices data printing down at -0.2%. Following this, the Dollar saw losses across the board. The lack of catalysts and events in both Euroland and the US economy have prompted EURUSD to prolong its sideline theme for the time being, whilst the Dollar itself has also been trading in a choppy fashion. EURUSD continued recent trends in failing to reach 1.1300.

The quiet data week ends today with a flurry of data due from the States as the US trading session opens. Focus will be on monthly PPI figures, with the potential Fed rate hike under a week away. The Fed’s stance that inflation must increase before there is an interest rate hike remains, so this data may give the greatest insight to Federal Open Market Committee plans.

Retail sales and unemployment data will also be released at the same time, along with Empire State and Philly Fed Manufacturing Indexes. Expect further volatility later in the trading session as Industrial Production data will also be released.

Data to Watch: 9:30am GBP Retail Sales MoM. 10:00am EUR Final CPI YoY, EUR Trade Balance. 12:00pm GBP BoE Interest Rate Decision. 1:30pm USD Core Retail Sales MoM, USD PPI MoM, USD Philly Fed Manufacturing Index, USD Unemployment Claims, USD Current Account, USD Empire State Manufacturing Index. 2:15pm USD Industrial Production MoM.

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