Pound Soars as Decade-High CPI Boosts December Rate Hike Bets

Pound (GBP) Surges as UK Inflation Overshoots 

The Pound (GBP) roared higher in yesterday’s session as UK inflation jumped to a ten-year high of 4.2%, beating forecasts of 3.9%. 

The strong CPI reading is the latest factor boosting rate hike bets for the Bank of England’s (BoE) December meeting, following impressive post-furlough jobs data and hawkish hints from the BoE Governor, Andrew Bailey. 

With no UK data due out, it could be a much quieter session for Sterling today. Domestic headlines over Brexit and rate hike expectations may drive most movement. 

Euro (EUR) Inches Higher on Mixed ECB Comments 

The Euro (EUR) managed to grind higher against many of its rivals yesterday following comments from Isabel Schnabel, a policymaker at the European Central Bank (ECB). 

Schanebl struck a balanced tone, warning against the risks of premature tightening. However, she also signalled that the ECB would watch the upside risks and ‘act if needed’, and she revealed there was disagreement among ECB officials over the persistence of inflationary pressures. 

More ECB speeches may influence EUR exchange rates today. If the tone is broadly dovish, the single currency could stumble. 

US Dollar (USD) Rudderless amid Lack of Data 

The US Dollar (USD) had mixed success yesterday as a quiet day on the data calendar left the ‘Greenback’ without a clear direction. 

Adding to this were differing opinions from Federal Reserve policymakers, with the St Louis Fed President James Bullard saying the bank should become ‘more hawkish’ while San Fransisco Fed President Mary Daly called for patience when it comes to raising rates. 

Another drop in initial jobless claims this afternoon could boost USD, while more Fed speak could also drive movement. 

Canadian Dollar (CAD) Slips on Weaker Oil Prices 

The oil-sensitive Canadian Dollar (CAD) dropped yesterday as WTI crude slipped by $2, dipping below $80 a barrel. 

Canada’s ADP employment change report this afternoon could bolster CAD. Economists expect the Canadian economy to have added 40,000 jobs in October. 

Australian Dollar (AUD) Gains on Cautiously Optimistic RBA 

The Australian Dollar (AUD) trended higher in overnight trade following cautious optimism from the Reserve bank of Australia (RBA). 

RBA Assistant Governor Luci Ellis said that the global economy is bouncing back strongly and there are opportunities for growth, as long as risk aversion doesn’t stifle expansion. 

New Zealand Dollar (NZD) Firms amid Risk-On Sentiment 

The risk-sensitive New Zealand Dollar (NZD) also gained overnight, buoyed by the upside in the ‘Aussie’ and an improving market mood. 

Samuel Birnie

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