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British Pound May Mostly Overlook UK Inflation Uptick

British Pound May Mostly Overlook UK Inflation Uptick

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound may not finding lasting direction in UK CPI figures
  • ZEW survey likely to pass with little fanfare on limited ECB impact
  • Japanese Yen down in quiet Asian trade as Nikkei recovers losses

November’s UK CPI report headlines the economic data docket in European trading hours. The headline inflation rate is expected to rise to 1.1 percent, the highest since October 2014. An upbeat result may offer a near-term boost to the British Pound but significant follow-through seems unlikely absent a dramatic deviation from consensus forecasts.

The Bank of England has made it quite plain that it intends to look though a pickup in price growth driven by Sterling weakness following the Brexit referendum. Governor Mark Carney and company have pledged not to sit idly by if the economy heats up too dramatically but with inflation well short of the 2 percent target, that seems like at most a distant threat.

The German ZEW Survey of analyst sentiment may likewise pass with relatively little fanfare. Sentiment is projected to improve a bit but the implications of such an outcome for ECB policy are virtually nil after the central bank extended its QE effort through the end of next year. As such, the near-term Euro impact ought to be modest unless fears of cooling amid post-Brexit vote uncertainty deliver a harsh disappointment.

The Japanese Yen underperformed in otherwise quiet overnight trade. The perennial anti-risk currency declined as the Nikkei 225 stock benchmark edged upward, erasing early-session losses to post a narrow gain on the day.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:45NZDMfg Activity Volume (QoQ) (3Q)2.1%-2.2%
21:45NZDMfg Activity SA (QoQ) (3Q)0.4%-1.8%
22:30AUDANZ Roy Morgan Weekly Consumer Conf. 113.4-118.6
0:30AUDNAB Business Conditions (NOV)5-7
0:30AUDNAB Business Confidence (NOV)5-4
0:30AUDHouse Price Index (QoQ) (3Q)1.5%2.5%2.0%
0:30AUDHouse Price Index (YoY) (3Q)3.5%4.6%4.1%
2:00CNYIndustrial Production (YoY) (NOV)6.2%6.1%6.1%
2:00CNYIndustrial Production YTD (YoY) (NOV)6.0%6.0%6.0%
2:00CNYRetail Sales (YoY) (NOV)10.8%10.2%10.0%
2:00CNYRetail Sales YTD (YoY) (NOV)10.4%10.3%10.3%
2:00CNYFixed Assets Ex Rural YTD (YoY) (NOV)8.3%8.3%8.3%

European Session

GMTCCYEVENTEXPPREVIMPACT
7:00EURGerman Wholesale Price Index (MoM) (NOV)-0.4%Low
7:00EURGerman Wholesale Price Index (YoY) (NOV)-0.5%Low
7:00EURGerman CPI (MoM) (NOV F)0.1%0.1%Medium
7:00EURGerman CPI (YoY) (NOV F)0.8%0.8%Medium
7:00EURGerman CPI EU Harmonized (MoM) (NOV F)0.0%0.0%Low
7:00EURGerman CPI EU Harmonized (YoY) (NOV F)0.7%0.7%Low
9:30GBPCPI (MoM) (NOV)0.2%0.1%High
9:30GBPCPI (YoY) (NOV)1.1%0.9%High
9:30GBPCPI Core (YoY) (NOV)1.3%1.2%High
9:30GBPRPI (MoM) (NOV)0.2%0.0%Medium
9:30GBPRPI (YoY) (NOV)2.1%2.0%Medium
9:30GBPRPI Ex Mort Int. Payments ((YoY)) (NOV)2.3%2.2%Low
9:30GBPPPI Input NSA (MoM) (NOV)-0.5%4.6%Low
9:30GBPPPI Input NSA (YoY) (NOV)13.5%12.2%Low
9:30GBPPPI Output NSA (MoM) (NOV)0.2%0.6%Medium
9:30GBPPPI Output NSA (YoY) (NOV)2.5%2.1%Medium
9:30GBPPPI Output Core NSA (MoM) (NOV)0.2%0.4%Low
9:30GBPPPI Output Core NSA (YoY) (NOV)2.3%1.9%Low
9:30GBPHouse Price Index (YoY) (OCT)7.3%7.7%Low
10:00EUREurozone Employment (QoQ) (3Q)-0.4%Low
10:00EUREurozone Employment (YoY) (3Q)-1.4%Low
10:00EURGerman ZEW Survey Current Situation (DEC)5958.8Medium
10:00EURGerman ZEW Survey Expectations (DEC)1413.8Medium
10:00EUREurozone ZEW Survey Expectations (DEC)-15.8Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.03381.04701.05531.06021.06851.07341.0866
GBP/USD1.23341.24881.25831.26421.27371.27961.2950

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

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