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UK Inflation, BOE Testimony Key for Pound and Risk Appetite Alike

UK Inflation, BOE Testimony Key for Pound and Risk Appetite Alike

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
  • See Economic Releases Directly on Your Charts with the DailyFX News App

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.

Losing Money Trading Forex? This is Probably Why.

Asia Session

21:45NZDFood Prices (MoM) (SEP)-0.5%--0.5%
22:30AUDANZ Roy Morgan Weekly Consumer Conf115.6-110.0
23:01GBPBRC Sales Like-For-Like (YoY) (SEP)2.6%1.5%-1.0%
23:50JPYBOJ Minutes for Sept. 14-15 Meeting---
23:50JPYBank Lending Incl Trusts (YoY) (SEP)2.6%2.6%2.7%
23:50JPYBank Lending Ex-Trusts (YoY) (SEP)2.6%2.7%2.8%
00:30AUDNAB Business Conditions (SEP)9.0-9.0
00:30AUDNAB Business Confidence (SEP)5.0-1.0
02:00CNYTrade Balance (CNY) (SEP)376.20B292.42B368.03B
02:00CNYExports (YoY) (CNY) (SEP)-1.1%-7.4%-6.1%
02:00CNYImports (YoY) (CNY) (SEP)-17.7%-16.5%-14.3%
03:09CNYTrade Balance ($) (SEP)$60.34B$48.21B$60.24B
03:09CNYExports (YoY) ($) (SEP)-3.7%-6.0%-5.5%
03:09CNYImports (YoY) ($) (SEP)-20.4%-16.0%-13.8%
05:00JPYConsumer Confidence Index (SEP)40.641.541.7
06:00JPYMachine Tool Orders (YoY) (SEP P)--16.5%

European Session

06:00EURGerman Wholesale Price Index (MoM) (SEP)--0.8%Low
06:00EURGerman Wholesale Price Index (YoY) (SEP)--1.1%Low
06:00EURGerman CPI (MoM) (SEP F)-0.2%-0.2%Medium
06:00EURGerman CPI (YoY) (SEP F)0.0%0.0%Medium
06:00EURGerman CPI – EU Harmonized (MoM) (SEP F)-0.3%-0.3%Low
06:00EURGerman CPI – EU Harmonized (YoY) (SEP F)-0.2%-0.2%Low
07:15CHFProducer & Import Prices (MoM) (SEP)-0.1%-0.7%Low
07:15CHFProducer & Import Prices (YoY) (SEP)-6.8%-6.8%Low
08:30GBPBOE Credit Conditions, Bank Liabilities Surveys --Medium
08:30GBPCPI (MoM) (SEP)0.0%0.2%High
08:30GBPCPI (YoY) (SEP)0.0%0.0%High
08:30GBPCPI Core (YoY) (SEP)1.1%1.0%High
08:30GBPRPI (MoM) (SEP)0.1%0.5%Low
08:30GBPRPI (YoY) (SEP)1.0%1.1%Low
08:30GBPRPI Ex Mort Int. Payments (YoY) (SEP)1.1%1.2%Low
08:30GBPPPI Input (MoM) (SEP)0.3%-2.4%Low
08:30GBPPPI Input (YoY) (SEP)-13.0%-13.8%Low
08:30GBPPPI Output (MoM) (SEP)-0.1%-0.4%Medium
08:30GBPPPI Output (YoY) (SEP)-1.8%-1.8%Medium
08:30GBPPPI Output Core (MoM) (SEP)0.0%0.0%Medium
08:30GBPPPI Output Core (YoY) (SEP)0.2%0.1%Medium
08:30GBPONS House Price (YoY) (AUG)5.0%5.2%Low
09:00EURGerman ZEW Survey Current Situation (OCT)64.067.5Medium
09:00EURGerman ZEW Survey Expectations (OCT)6.512.1Medium
09:00EUREurozone ZEW Survey Expectations (OCT)-33.3Medium
09:00GBPBOE’s Vlieghe Testifies to UK Lawmakers--Medium
10:00GBPBOE’s McCafferty Testifies to UK Lawmakers--Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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