Market Drivers for October 13, 2015
- Cable sold on cooler CPI data
- Comm dollars weaker as Chinese Imports slump
- Nikkei -1.11% Europe -1.44%
- Oil $47/bbl
- Gold $1156/oz
Europe and Asia
CNY: Chinese Trade 60.3B vs. 46.9B but Imports slump -17%
GBP: UK CPI -0.1% vs. 0.0% eyed
EUR: ZEW
North America
No Data today
Cable was crushed in early London dealing today as weaker than expected UK inflation data diminished any expectations of any possible BOE tightening in the near future, sending the unit on a 100 point dive from its earlier highs at the open of the day.
Cable actually saw a strong rally in late Asian sessions after Anheuser-Busch Inbev SA (N:BUD) and SAB Miller came to terms on their merger, agreeing on a price of 44GBP per share. Much of the exchange rate flow was already priced into the market, but the confirmation of the deal served to push cable to a high of 1.5380. However, the market’s attention quickly turned to the latest UK inflation figures which printed at -0.1% versus 0.0% as transport price plummeted.
Cable fell to a low of 1.5230 before finally finding some buyers, but may see further weakness as the day proceeds, given the market’s pessimism about any action from the BoE. Although the UK economy continues to perform relatively well, the lack of any inflation – and indeed the return of disinflationary pressures into the price pipeline – is sure to keep MPC members firmly neutral for the time being. Perhaps the only bright spot in the report was the fact that goods deflation was offset somewhat by increases in services, but the BoE will likely want to see an improving inflation trend through the end of this year before considering any action on rates.
Elsewhere, the commodity currencies saw some relative weakness today in the wake of Chinese trade balance numbers. Although the Chinese trade surplus exceeded expectations printing at 60.3 B versus 46.9B eyed, the gains were on the back of a 17% plunge in imports, indicating that demand in China continues to wane. The Aussie dipped back to .7300 and the kiwi dropped below the .6700 figure before finding some support. The high yielders however continue to enjoy support for the time being as US rates are likely to remain stationary until December at the earliest.
In Europe the German ZEW survey of sentiment came in at 1.9 versus 6.8 as concerns over the VW (OTC:VLKAY) crisis certainly weighed on investors minds, but the euro managed to shrug off the news, holding above the 1.1375 level. The pair has been benefiting from EUR/GBP flows with the cross now eyeing the .7500 level on persistent pessimism over UK rates. The pair probed the 1.1400 figure for the first time in a month as anti-dollar flows continue to spur a short covering rally in the unit.
In the US there are no major data releases and the key question for North American trade is whether the anti-dollar sentiment will continue to push the majors higher now that they have reached critical resistance levels. With EUR/USD at 1.1400, the Aussie at .7300 and the kiwi at .6700, forward progress may become considerably more difficult unless US economic performance begins to deteriorate materially.