Parliament must ratify Brexit deal, Pound rejoices
The Pound jumped on the news that Parliament will ratify the final version of the Brexit deal, when negotiated, and this outweighed concerns about a larger than expected rise in inflation. Sterling produced one of its best daily performances since July, gaining 1% against the Euro and reaching 1.2315 against the Dollar.
UK Consumer Price Index (CPI) Inflation rose to 1.0% in September, up from 0.6% in August. Clothing saw its biggest price rise since 2010 and fuel, which was falling a year ago, was also more expensive. Crucially, the ONS said there was no explicit evidence that the weaker Pound was the reason for higher prices. This indicates that the Brexit-induced weakness in the Pound will drive up inflation at some point in the future.
The headline increase in US CPI met market expectations as energy prices rose. The core monthly increase of 0.1% was slightly below expectations of a 0.2% gain with the annual increase held at 2.2%. The data relieved any perceived pressure on the Federal Reserve to raise interest rates in the near future. There is some expectation that US traders will keep their powder dry and reduce their trading volumes in advance of the third and final televised presidential debate this evening.
There was some speculation that the European Central Bank (ECB) would take a dovish stance at this Thursday’s policy meeting which curbed Euro support, while a generally favourable attitude towards risk also put some downward pressure on the currency as it lost some ground on the main crosses. The latest ECB lending survey indicated a tightening in credit standards on business loans which will cause concerns over the outlook for production and investment in Europe.
Data to watch: 9.30am UK ILO Unemployment Rate, Avg Earning, incl & excl bonus, Claimant count rate & change. 1.30pm US Housing Starts & Permits. 6pm Fed’s Beige Book.