Newsletter – 18th October 2017

Morning Bulletin

Yesterday

  • UK CPI headlined yesterday morning and as per the forecasts it rose to 3.0% y/y to September; the first time Inflation has hit 3.0% since May 2012. In the immediate aftermath Sterling rallied in FX space, however the gains were limited as the print was ultimately in-line with expectations.
  • In stark contrast to the UK’s soaring inflationary pressures, the Eurozone continues to see sluggish price growth with their y/y inflation at 1.5% as expected.
  • The Pound wasn’t on the front-foot for long yesterday morning and it sharply declined following comments from both the Bank of England’s Governor Carney and the new Deputy Governor Ramsden as they addressed the Treasury Select Committee. Carney did suggest a rate hike could be approproate in the coming months, however he gave no indication as to when that could be. Whilst his new colleague Ramsden placed himself in the Dovish camp, as he said he was not with the majority of members who deem higher rates appropriate in the months ahead.
  • Sterling had peaked at 1.1288 and 1.3287 following the UK CPI print against the Euro and US Dollar respectively, but quickly declined following the BOE member’s comments, eventually trading down to a day’s low of 1.1195 and 1.3154 respectively.
  • There were a number of key prints out of the US yesterday afternoon:
    • Import Prices m/m +0.7% (+0.6% Exp)
    • Capacity Utilization Rate 76.0% (76.2% Exp)
    • Industrial Production m/m +0.3% as expected
  • The New Zealand Global Dairy Trade Index declined for the second consecutive time with prices down -1.0%.
  • US Fed Member Kaplan has said he will keep an open mind to hiking rates at the next meeting and also believes further hikes are likely appropriate given the current economic outlook.
  • EU Chief Negotiator Barnier has said whilst progress in the Brexit talks in not yet there, he has seen a new dynamic since Theresa May’s address in Florence.
Overnight

  • The US Stock Markets continue to soar in 2017, with the Dow Jones hitting 23,000 for the first time before the close last night, whilst the S&P also hitting all-time highs.
  • According to US Fed Member Harker inflation data will determine whether the Fed hikes rates once more time this year, adding they needed to be prudent and take their time.
  • A White House Official said President Trump has narrowed his next Fed Chair choice down to 5 candidates, they included current Chair Janet Yellen, Gary Cohn, Kevin Warsh, Jerome Powell and John Taylor.
Today
  • UK Employment data takes centre stage this morning with Average Earnings being the most closely watched print at 9.30am. With a CPI reading of 3% yesterday the BOE will not want to see the gap between inflation and earnings widen any further.
  • This afternoon there are a number of US Federal Reserve members due to speak followed by some medium impact US data at 1.30pm.

 

Currency Pair Interbank Rate % Change on Day
GBP/EUR 1.1201 -0.04
GBP/USD 1.3178 -0.08
EUR/USD 1.1761 -0.03
AUD/USD 0.7833 -0.14

 

Time (GMT) Region Data Release Forecast Previous
09.10 EUR ECB President Draghi Speaks
09.30 GBP Average Earnings Index 3m/y 2.1% 2.1%
09.30 GBP Claimant Count Change 1.3K -2.8K
09.30 GBP Unemployment Rate 4.3% 4.3%
13.00 USD Fed Member Dudley Speaks
13.00 USD Fed Member Kaplan Speaks
13.30 CAD Manufacturing Sales m/m -0.1% -2.6%
13.30 USD Building Permits 1.25M 1.27M
13.30 USD Housing Starts 1.18M 1.18M