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Forex Analysis: Pound May Rise as BOE Inflation Report Dents QE Bets

Forex Analysis: Pound May Rise as BOE Inflation Report Dents QE Bets

Ilya Spivak, Head Strategist, APAC

The British Pound may find support as the Bank of England opts for a wait-and-see approach in its Inflation Report, signaling additional QE is unlikely for now.

Talking Points

  • Pound May See Near-Term Gains as BOE Inflation Report Dents QE Outlook
  • US Dollar, Yen Fall on Risk Rebound China’s Leadership Make-Up Clarifies

The release of the Bank of England Inflation Report headlines the calendar in European hours. Traders will comb the document for clues about the likelihood of expanded QE efforts in the months ahead as well as guidance on the success of the new FLS lending program. UK economic data has performed broadly better relative to expectations over recent weeks, suggesting a wait-and-see posture is likely. This may ease near-term fears of further dilution and offer a bit of a lift to the British Pound, although follow-through is likely to be relatively limited considering this is already the base-case scenario at play in the markets. Separately, UK Jobless Claims are set to hold flat in October.

The US Dollar and Japanese Yen slumped amid waning safe-haven demand as risk appetite firmed across forex markets in overnight trade. Newswires chalked up the outcome the emergence of a degree of certainty on political leadership in China, where the 18th Communist Party Congress wraps up today. Vice President Xi Jinping and Vice Premier Li Keqiang were reportedly reappointed to the Party’s Central Committee, putting them in a position to take the reins and thereby reinforcing the markets’ status quo scenario for who would be in charge of the world’s second-largest economy for the next decade.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Retail Sales Ex Inflation (QoQ) (3Q)

-0.4%

0.4%

1.3%

23:30

AUD

Westpac Consumer Confidence (NOV)

5.2%

-

1.0%

23:30

AUD

Westpac Consumer Confidence Index (NOV)

104.3

-

99.2

0:30

AUD

Wage Cost Index (QoQ) (3Q)

0.7%

0.8%

1.0%

0:30

AUD

Wage Cost Index (YoY) (3Q)

3.7%

3.8%

3.7%

2:00

NZD

Non Resident Bond Holdings (OCT)

62.4%

-

62.4%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:45

EUR

French CPI Ex Tobacco Index (OCT)

124.81 (A)

124.74

Low

7:45

EUR

French CPI - EU Harmonised (YoY) (OCT)

2.1% (A)

2.2%

Low

7:45

EUR

French CPI - EU Harmonised (MoM) (OCT)

0.2% (A)

-0.3%

Low

7:45

EUR

French CPI (MoM) (OCT)

0.2% (A)

-0.3%

Low

7:45

EUR

French CPI (YoY) (OCT)

1.9% (A)

1.9%

Low

9:30

GBP

Jobless Claims Change (OCT)

0.0K

-4.0K

High

9:30

GBP

Claimant Count Rate (OCT)

4.8%

4.8%

Medium

9:30

GBP

Employment Change (3M/3M) (SEP)

135K

212K

Medium

9:30

GBP

Weekly Earnings exBonus (3M/YoY) (SEP)

2.0%

2.0%

Low

9:30

GBP

Average Weekly Earnings (3M/YoY) (SEP)

1.9%

1.7%

Low

9:30

GBP

ILO Unemployment Rate (3M) (SEP)

7.9%

7.9%

Medium

10:00

CHF

ZEW Survey (Expectations) (NOV)

-

-28.9

Medium

10:00

EUR

Euro-Zone Industrial Production (MoM) (SEP)

-2.0%

0.6%

Low

10:00

EUR

Euro-Zone Industrial Production (YoY) (SEP)

-2.2%

-2.9%

Medium

10:00

EUR

Italy to Sell 2015, 2023 and 2029 Bonds

-

-

Medium

10:30

GBP

Bank of England Inflation Report

-

-

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2665

1.2833

GBPUSD

1.5846

1.5938

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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