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British Pound, US Dollar Look to CPI Data to Guide Rate Hike Bets

British Pound, US Dollar Look to CPI Data to Guide Rate Hike Bets

Talking Points:

  • British Pound May Decline if UK Inflation Data Undermines BOE Outlook
  • US Dollar Gains Before CPI Data That May Boost Fed Rate Hike Chances
  • TrackEconomic News Directly on Your Charts with the DailyFX News App

UK CPI figures headline the economic calendar in European trading hours. The core year-on-year inflation rate is expected to print at 1 percent in October, unchanged from the prior month. UK price-growth data broadly deteriorated relative to consensus forecasts since mid-year even as economists have upgraded expectations, opening the door for a downside surprise. Such an outcome may dent BOE rate hike bets and weigh on the British Pound.

Later in the day, US CPI figures capture the spotlight. Core year-on-year inflation is projected to remain at 1.9 percent, putting it within a hair of the Fed’s 2 percent target. This hints that headline price growth is poised to recover as the overhang from last year’s crude oil plunge filters out of calculations in the months ahead. This would help set the stage for a rate hike and may push the US Dollar higher. Indeed, the greenback rose alongside Treasury bond yields overnight, seemingly in anticipation of the CPI release.

The New Zealand Dollar underperformed in overnight trade. Prices fell alongside a drop in front-end bond yields, hinting at a dovish shift in RBNZ monetary policy bets as the likely catalyst. Traders now price in at least one 25bps interest rate cut over the coming 12 months, with an implied probability of 50 percent of seeing the move at next month’s meeting.

Losing Money Trading Forex? This Might Be Why.

Asia Session

GMTCCYEVENTACTEXPPREV
21:30AUDRBA's Kent Speaks at Sydney Conference ---
22:30AUDANZ Roy Morgan Weekly Consumer Conf115.9-116.6
23:50JPYHousing Loans (YoY) (3Q)2.4%-2.4%
00:30AUDRBA November Meeting Minutes ---
02:00NZDRBNZ 2yr Inflation Expectation (4Q)1.85%-1.94%
04:00JPYTokyo Condominium Sales (YoY) (OCT)-6.5%--27.2%

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00EUREU27 New Car Registrations (OCT)-9.8%Low
09:30GBPCPI (MoM) (OCT)0.1%-0.1%High
09:30GBPCPI (YoY) (OCT)-0.1%-0.1%High
09:30GBPCPI Core (YoY) (OCT)1.0%1.0%High
09:30GBPRPI (MoM) (OCT)0.1%-0.1%Low
09:30GBPRPI (YoY) (OCT)0.9%0.8%Low
09:30GBPRPI ex Mort Int. Payments (YoY) (OCT)0.9%0.9%Low
09:30GBPPPI Input (MoM) (OCT)0.2%0.6%Low
09:30GBPPPI Input (YoY) (OCT)-12.0%-13.3%Low
09:30GBPPPI Output (MoM) (OCT)-0.1%-0.1%Medium
09:30GBPPPI Output (YoY) (OCT)-1.4%-1.8%Medium
09:30GBPPPI Output Core (MoM) (OCT)0.0%0.1%Medium
09:30GBPPPI Output Core (YoY) (OCT)0.4%0.2%Medium
09:30GBPONS House Price (YoY) (SEP)5.4%5.2%Low
10:00EURGerman ZEW Survey Current Situation (NOV)55.255.2Medium
10:00EURGerman ZEW Survey Expectations (NOV)6.01.9Medium
10:00EUREurozone ZEW Survey Expectations (NOV)-30.1Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.05051.06091.06481.07131.07521.08171.0921
GBPUSD1.50861.51481.51751.52101.52371.52721.5334

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

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

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