British Pound May Rise as UK CPI Data Keeps BOE Stimulus at Bay

2016-11-15 06:49:00

Ilya Spivak, Head Strategist, APAC

Talking Points:

British Pound may rise if UK CPI meaningfully surpasses expectations
German and Eurozone GDP revisions may not mean much for the Euro
US Dollar looks to Retail Sales data, Fed-speak to feed rate hike bets

UK CPI data headlines the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to rise to 1.1 percent, the highest in two years. The Bank of England has clearly indicated its intention to look through a temporary price growth uptick driven by British Pound weakness following the Brexit referendum. However, the BOE has also said it will not stand idly by if the increase markedly tops expectations or proves sticky. On balance, this suggests a print broadly in line with consensus forecasts ought to pass with relatively little fanfare while an upside surprise may nudge Sterling upward.

A revised set of German third-quarter GDP figuresis expected to show a bit of a downgrade, with output adding 0.3 percent versus the 0.4 percent gain reported in initial estimates. An update of the region-wide GDP metric for the same period is seen confirming the flash reading of 0.3 percent. The implications of such outcomes for near-term ECB policy trends seem relatively limited. This means that – absent sharp deviations from baseline forecasts – the Euro ought to pay little attention to the results. The ZEW Survey of investor confidence may be noteworthy to the extent that it reveals the level of concern about uncertainties linked to Brexit as well as the US presidential election. Here too however, the near-term FX impact may be minimal.

Later in the day, the spotlight will turn to October’s US Retail Sales report as well as comments from Fed Governor Daniel Tarullo, Vice Chair Stanly Fischer and Boston branch President Eric Rosengren. US economic news-flow has improved relative to consensus forecasts over the past month. More of the same this time around coupled with now-familiar cautiously hawkish rhetoric from Fed officials may help further steepen the priced-in rate hike path. Needless to say, such a scenario will probably bode well for the US Dollar.

Financial markets took on a corrective tone in overnight trade. The US Dollar retraced downward having climbed to levels unseen in 9 months against an average of its major counterparts in yesterday’s session. The anti-risk Japanese Yen recovered having borne a good deal of selling pressure amid surging risk appetite in the aftermath of last week’s US presidential election.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
21:30	NZD	Performance Services Index (OCT)	56.3	-	54.2
22:30	AUD	ANZ Roy Morgan Weekly Consumer Conf	118.2	-	117.8
0:30	AUD	RBA Nov. Meeting Minutes	-	-	-
4:00	JPY	Tokyo Condominium Sales (YoY) (OCT)	-0.6%	-	40.9%
6:00	JPY	Machine Tool Orders (YoY) (OCT F)	-8.9%	-	-8.9%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
7:00	EUR	Germany GDP SA (QoQ) (3Q P)	0.3%	0.4%	High
7:00	EUR	Germany GDP WDA (YoY) (3Q P)	1.8%	1.8%	High
7:00	EUR	Germany GDP NSA (YoY) (3Q P)	1.6%	3.1%	High
7:45	EUR	France CPI (MoM) (OCT F)	0.0%	0.0%	Low
7:45	EUR	France CPI (YoY) (OCT F)	0.4%	0.4%	Low
9:00	EUR	Italy GDP WDA (QoQ) (3Q P)	0.2%	0.0%	Medium
9:00	EUR	Italy GDP WDA (YoY) (3Q P)	0.8%	0.8%	Medium
9:30	GBP	CPI (MoM) (OCT)	0.3%	0.2%	High
9:30	GBP	CPI (YoY) (OCT)	1.1%	1.0%	High
9:30	GBP	CPI Core (YoY) (OCT)	1.4%	1.5%	High
9:30	GBP	RPI (MoM) (OCT)	0.2%	0.2%	Low
9:30	GBP	RPI (YoY) (OCT)	2.3%	2.0%	Low
9:30	GBP	RPI Ex Mort Int. Payments (YoY) (OCT)	2.4%	2.2%	Low
9:30	GBP	PPI Input NSA (MoM) (OCT)	2.0%	0.0%	Low
9:30	GBP	PPI Input NSA (YoY) (OCT)	9.3%	7.2%	Low
9:30	GBP	PPI Output NSA (MoM) (OCT)	0.4%	0.2%	Medium
9:30	GBP	PPI Output NSA (YoY) (OCT)	1.8%	1.2%	Medium
9:30	GBP	PPI Output Core NSA (MoM) (OCT)	0.1%	0.1%	Low
9:30	GBP	PPI Output Core NSA (YoY) (OCT)	1.6%	1.4%	Low
9:30	GBP	House Price Index (YoY) (SEP)	8.1%	8.4%	Low
10:00	EUR	Eurozone Trade Balance SA (SEP)	22.1b	23.3b	Low
10:00	EUR	Eurozone Trade Balance NSA (SEP)	22.5b	18.4b	Low
10:00	EUR	Germany ZEW Survey Current Situation (NOV)	61.6	59.5	Medium
10:00	EUR	Germany ZEW Survey Expectations (NOV)	8.1	6.2	Medium
10:00	EUR	Eurozone ZEW Survey Expectations (NOV)	-	12.3	Medium
10:00	EUR	Eurozone GDP SA (QoQ) (3Q P)	0.3%	0.3%	High
10:00	EUR	Eurozone GDP SA (YoY) (3Q P)	1.6%	1.6%	High
10:00	GBP	BOE's Carney at Treasury Committee	-	-	Medium