Surging Inflation and BoE Reluctance to Hike Drags GBP Lower
There was plenty to keep the Pound on the decline yesterday. Data showed that inflation hit a five-year high in September, with the latest consumer price index rising 3%.
However, core growth remained at 2.7%, which may prompt the Bank of England (BoE) to continue resisting the pressure to hike interest rates soon. Governor Mark Carney spoke to lawmakers and stated that inflation had not yet peaked, while warning about the negative impact of a ‘no deal’ Brexit.
UK jobless claims and average weekly earnings figures could further soften the Pound if they point to deteriorating conditions for UK households.
Weakening German and Eurozone Sentiment Unsettles Euro
The Pound to Euro exchange rate fell yesterday, although EUR was not having a good day elsewhere. The common currency was undermined by a string of disappointing results from the latest ZEW surveys. The German current situation index fell from 87.9 to 87, instead of rising to 88.5 as forecast, while the economic sentiment index only rose to 17.6, instead of the predicted 20. Eurozone economic sentiment also worsened.
European Central Bank (ECB) policymakers including President Mario Draghi, Chief Economist Peter Praet and Executive Board Member Benoît Cœuré are all appearing throughout the day at an event in Frankfurt today. The Euro could be in for volatility if the monetary policy outlook changes in light of their comments.
USD/GBP Weakens as US Industry Figures Firm Case for Rate Hike
The latest US industrial production figures supported the case for an interest rate hike in December, undermining the GBP/USD exchange rate further. Industrial production not only rose 0.3% in line with forecasts during September, but the previous decline in output was revised down to -0.7%.
Federal Reserve officials William Dudley and Robert Kaplan are set to discuss the topic of ‘Economic Development’ at an event today, so traders will be looking to see how their view of the economy going forwards tallies with the idea of future interest rate hikes.
GBP/CAD Slips Lower Even as Cool Risk Appetite Weighs on ‘Loonie’
The Pound Sterling to Canadian Dollar exchange rate slumped yesterday, although weak risk-appetite dragged CAD lower overall. The ‘Loonie’ failed to benefit from firm crude oil prices on the back of fighting in a key oil-rich region of Iraq.
Canadian manufacturing shipments data today is expected to show that the decline seen in July slowed in August; not exactly a positive in of itself, but a move in the right direction that could lend CAD some support.
Positive RBA Economic Outlook Furthers GBP/AUD Losses
Sterling dropped against the Australian Dollar yesterday, despite the Reserve Bank of Australia (RBA) sticking to its neutral monetary policy bias. Minutes from the latest rate-setting meeting showed that the RBA was confident on the outlook for the labour market, wages and inflation, however.
GBP/NZD Decline Softened as Dairy Prices Fall at Auction
The Pound slipped against the New Zealand Dollar, but was saved from further losses by broad weakness for the ‘Kiwi’. NZD was on the decline after the latest Global Dairy Trade auction resulted in a -1% drop in the price of dairy products, softening the outlook for producers and distributors of New Zealand’s top export.
Data Released Today
09:10 EUR ECB President Draghi Speaks in Frankfurt
09:30 GBP Claimant Count Rate (SEP)
09:30 GBP Jobless Claims Change (SEP)
09:30 GBP Average Weekly Earnings (3M/YoY) (AUG)
09:30 GBP Weekly Earnings ex Bonus (3M/YoY) (AUG)
09:30 GBP ILO Unemployment Rate (3M) (AUG)
09:30 GBP Employment Change (3M/3M) (AUG)
13:00 USD Fed’s Dudley and Kaplan Discuss Economic Development