Headlines
• GBP/EUR Struggling before CPI –
0.0% inflation forecast
• Will Fed raise rates in 2015? –
USD struggling
• Australian Dollar Trims Gains –
Chinese trade data disappoints
• NZD, CAD Lower after Chinese Trade Stats –
Imports plummet
Sterling
The Pound was trending slightly lower against the Euro but higher against the US Dollar and its commodity-correlated peers ahead of the release of the UK’s Consumer Price Index for September.
Gains against the ‘Greenback’ were accrued amid bets that the Fed will leave interest rates on hold until 2016 while Sterling’s advance on the Australian Dollar, New Zealand Dollar and Canadian Dollar followed the publication of China’s latest trade figures.
With Chinese imports plummeting in September demand for assets belonging to nations with strong trade links to China fell and the Pound was able to recover some of its recent losses.
If the UK’s CPI prints as expected, revealing annual non-core inflation of 0.0% and a slightly higher core figure of 1.1%, Pound movement may be limited. However, a surprising result would have an impact on Bank of England (BoE) interest rate hike expectations and could trigger Sterling volatility.
Euro
A quiet day in terms of European data resulted in limited Euro movement on Monday. The common currency held its own against the Pound in the face of US Dollar weakness and bearish BoE interest rate hike speculation but was otherwise trading fairly flatly.
This morning’s ecostats for Germany had little impact on Euro demand, with the nation’s Consumer Price Index confirming previous forecasts of 0.0% annual inflation and a -0.2% month-on-month decline. Germany’s Wholesale Price Index, meanwhile, was down -0.6% on the month and -1.8% on the year in September.
The Euro could slide in the hours ahead if the German ZEW Economic Sentiment survey shows the marked decline in confidence predicted by economists. The gauge is forecast to have fallen from 12.1 to 6.5 in October, with the nation’s Current Situation Index also expected to dip.
US Dollar
Over the weekend Federal Reserve Vice-Chairman Stanley Fischer asserted that the view among policymakers that US interest rates will still increase in 2015 is ‘an expectation, not a commitment’.
The prospect of a run of less-than-impressive US reports preventing the Fed from making an adjustment to borrowing costs before the end of the year is weighing on the US Dollar this week and with no influential US data due out until tomorrow, the ‘Greenback’ may remain on the back foot.
Wednesday’s US Advance Retail Sales figure for September is expected to come in at 0.2%. While a lower-than-forecast result would be US Dollar negative, a surprising surge in consumer spending may give the currency a boost ahead of Thursday’s US inflation report.
Canadian Dollar
A quiet trading session saw the Canadian Dollar ease lower against a number of its peers on Monday, with the currency being little effected by commentary from the Bank of Canada (BOC).
During a speech on financial stability, BOC Governor Stephen Poloz argued that monetary policy should be the last line of defence. However, he did add; ‘We knew that easing policy would have implications for financial stability. However, we also knew that those concerns had to remain subordinate to the primary mission of achieving our inflation target and getting our policy back in the zone where the risks are balanced.’
Canadian Dollar strength was undermined during the Australasian session as Chinese trade data weighed on commodity-correlated currencies.
Australian Dollar
After a sustained bullish run the Australian Dollar came up against difficulties overnight as investors responded to the latest batch of trade data from the world’s second largest economy.
As China is one of Australia’s main trading partners the news that imports plummeted by -17.7% in September took a toll on demand for the ‘Aussie’. Exports dipped just -1.1%, considerably less-than-forecast. China subsequently posted a trade surplus of 376.2 billion Yuan.
With this surprise from China dictating Australian Dollar movement, Australian data failed to spark AUD fluctuations. The National Australia Bank (NAB) Business Conditions index for September printed at 9, unchanged from the previous month’s revised figure, while the Business Confidence gauge rose from 1 to 5.
New Zealand Dollar
China’s trade numbers also took a toll on the New Zealand Dollar during the local session, with the currency sliding against the US Dollar, Pound and Euro. Some investors have asserted that the recent spike in risk appetite will fade soon and that the ‘Kiwi’s rally will end abruptly when it does.
New Zealand’s Food Price report printed at -0.5% in September, month-on-month, mirroring August’s result.
Data Released Today
GBP Consumer Price Index (MoM) (SEP)
GBP Consumer Price Index (YoY) (SEP)
EUR German ZEW Survey (Current Situation) (OCT)
EUR German ZEW Survey (Economic Sentiment) (OCT)