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UK Inflation, BOE Testimony Key for Pound and Risk Appetite Alike
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Talking Points:
Commodity Dollars Drop, Yen Gains as Risk Aversion Breaks Out Overnight
UK CPI Data, BOE Testimony Key for British Pound and Risk Appetite Alike
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The Australian, Canadian and New Zealand Dollars underperformed in overnight trade as risk aversion struck Asian bourses, weighing on the sentiment-linked currencies. The anti-risk Japanese Yen traded broadly higher. The MSCI Asia Pacific regional benchmark equity index fell 1 percent.
The dour mood emerged as Japanese shares re-opened lower having been closed for a holiday yesterday. Pessimism may have been triggered after minutes from September’s BOJ policy meeting hinted the central bank has no intention of expanding stimulus for now. Officials dismissed recently negative inflation readings reflect the temporary influence of oil and do not amount to a change in trend, adding that longer-term price growth bets are firming.
The risk-off push gathered steam following a worrying set of Chinese trade figures. Imports plunged 20.4 percent year-on-year in September, missing forecasts calling for a more modest 16 percent decline and yielding the largest drawdown in seven months. The reading pointed to ebbing demand from the world’s second-largest economy. This fueled worries about negative knock-on efforts for the multitude of countries where growth is highly sensitive to Chinese demand (like Australia, for example).
UK CPI data is in the spotlight in European trading hours. The core year-on-year inflation rate is expected to tick higher to 1.1 percent in September. Realized UK price-growth data outcomes have steadily improved relative to consensus forecasts since March, opening the door for an upside surprise.
Such a result may rekindle BOE rate hike speculation, boosting the British Pound. It may likewise compound pressure on risk appetite however. Leading survey data casts doubt on the probability of such a result however, pointing to steep disinflation in the manufacturing sector and only sluggish price growth on the services side of the equation. A soft print may bode ill for the Sterling but could be modestly supportive on the sentiment front.
Testimonies from theBOE’s Gertjan Vlieghe and Ian McCafferty before Parliament’s Treasury Select Committee will further inform investors’ MPC outlook. Mr Vlieghe will replace David Miles on the rate-setting committee and markets will be keen to hear where his predilections lie. Mr Cafferty has taken to dissenting from the consensus view at recent policy meetings to vote for a rate hike. He will no doubt have to explain himself, which ought to make for interesting fodder as well.
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Asia Session
GMT | CCY | EVENT | ACT | EXP | PREV |
21:45 | NZD | Food Prices (MoM) (SEP) | -0.5% | - | -0.5% |
22:30 | AUD | ANZ Roy Morgan Weekly Consumer Conf | 115.6 | - | 110.0 |
23:01 | GBP | BRC Sales Like-For-Like (YoY) (SEP) | 2.6% | 1.5% | -1.0% |
23:50 | JPY | BOJ Minutes for Sept. 14-15 Meeting | - | - | - |
23:50 | JPY | Bank Lending Incl Trusts (YoY) (SEP) | 2.6% | 2.6% | 2.7% |
23:50 | JPY | Bank Lending Ex-Trusts (YoY) (SEP) | 2.6% | 2.7% | 2.8% |
00:30 | AUD | NAB Business Conditions (SEP) | 9.0 | - | 9.0 |
00:30 | AUD | NAB Business Confidence (SEP) | 5.0 | - | 1.0 |
02:00 | CNY | Trade Balance (CNY) (SEP) | 376.20B | 292.42B | 368.03B |
02:00 | CNY | Exports (YoY) (CNY) (SEP) | -1.1% | -7.4% | -6.1% |
02:00 | CNY | Imports (YoY) (CNY) (SEP) | -17.7% | -16.5% | -14.3% |
03:09 | CNY | Trade Balance ($) (SEP) | $60.34B | $48.21B | $60.24B |
03:09 | CNY | Exports (YoY) ($) (SEP) | -3.7% | -6.0% | -5.5% |
03:09 | CNY | Imports (YoY) ($) (SEP) | -20.4% | -16.0% | -13.8% |
05:00 | JPY | Consumer Confidence Index (SEP) | 40.6 | 41.5 | 41.7 |
06:00 | JPY | Machine Tool Orders (YoY) (SEP P) | - | -16.5% |
European Session
GMT | CCY | EVENT | EXP | PREV | IMPACT |
06:00 | EUR | German Wholesale Price Index (MoM) (SEP) | - | -0.8% | Low |
06:00 | EUR | German Wholesale Price Index (YoY) (SEP) | - | -1.1% | Low |
06:00 | EUR | German CPI (MoM) (SEP F) | -0.2% | -0.2% | Medium |
06:00 | EUR | German CPI (YoY) (SEP F) | 0.0% | 0.0% | Medium |
06:00 | EUR | German CPI – EU Harmonized (MoM) (SEP F) | -0.3% | -0.3% | Low |
06:00 | EUR | German CPI – EU Harmonized (YoY) (SEP F) | -0.2% | -0.2% | Low |
07:15 | CHF | Producer & Import Prices (MoM) (SEP) | -0.1% | -0.7% | Low |
07:15 | CHF | Producer & Import Prices (YoY) (SEP) | -6.8% | -6.8% | Low |
08:30 | GBP | BOE Credit Conditions, Bank Liabilities Surveys | - | - | Medium |
08:30 | GBP | CPI (MoM) (SEP) | 0.0% | 0.2% | High |
08:30 | GBP | CPI (YoY) (SEP) | 0.0% | 0.0% | High |
08:30 | GBP | CPI Core (YoY) (SEP) | 1.1% | 1.0% | High |
08:30 | GBP | RPI (MoM) (SEP) | 0.1% | 0.5% | Low |
08:30 | GBP | RPI (YoY) (SEP) | 1.0% | 1.1% | Low |
08:30 | GBP | RPI Ex Mort Int. Payments (YoY) (SEP) | 1.1% | 1.2% | Low |
08:30 | GBP | PPI Input (MoM) (SEP) | 0.3% | -2.4% | Low |
08:30 | GBP | PPI Input (YoY) (SEP) | -13.0% | -13.8% | Low |
08:30 | GBP | PPI Output (MoM) (SEP) | -0.1% | -0.4% | Medium |
08:30 | GBP | PPI Output (YoY) (SEP) | -1.8% | -1.8% | Medium |
08:30 | GBP | PPI Output Core (MoM) (SEP) | 0.0% | 0.0% | Medium |
08:30 | GBP | PPI Output Core (YoY) (SEP) | 0.2% | 0.1% | Medium |
08:30 | GBP | ONS House Price (YoY) (AUG) | 5.0% | 5.2% | Low |
09:00 | EUR | German ZEW Survey Current Situation (OCT) | 64.0 | 67.5 | Medium |
09:00 | EUR | German ZEW Survey Expectations (OCT) | 6.5 | 12.1 | Medium |
09:00 | EUR | Eurozone ZEW Survey Expectations (OCT) | - | 33.3 | Medium |
09:00 | GBP | BOE’s Vlieghe Testifies to UK Lawmakers | - | - | Medium |
10:00 | GBP | BOE’s McCafferty Testifies to UK Lawmakers | - | - | Medium |
Critical Levels
CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
EURUSD | 1.1017 | 1.1101 | 1.1154 | 1.1185 | 1.1238 | 1.1269 | 1.1353 |
GBPUSD | 1.5264 | 1.5319 | 1.5344 | 1.5374 | 1.5399 | 1.5429 | 1.5484 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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