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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

Ilya Spivak, Head Strategist, APAC

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

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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