Market Drivers November 14, 2017
Europe and Asia
GBP: UK CPI 3.0% vs. 3.1%
EUR: EZ GDP 2.5% vs. 2.5%
North America
USD: PPI 8:30
The euro broke out today rising through the 1.1700 level while cable was hobbled by weaker than expected UK inflation data.
EUR/USD rose strongly through Asian and early European trade taking out the 1.1700 level for the first time since October. There was no specific catalyst to drive the pair higher but it bottomed out several days ago ahead of the 1.1550 level and today’s move had the look of a short covering squeeze as longs pressed the move towards 1.1750.
In UK however, lower CPI data dampened demand for cable. CPI came in at 3.0% versus 3.1% eyed. The inflation rate for food and non-alcoholic beverages continued to increase to 4.1%, the highest since September 2013 and the inflation was lower only due to decline to fuel and furniture costs. Still, it appears that for now the pace of inflation in UK may have peaked and will play to BoE’s policy goal of keeping rates stationary for now. Cable traded around 1.3100 and could remain weaker for the rest of the day on a relative basis.
There was an all-star panel of ECB, Fed, BOJ and BoE chiefs at a panel in Frankfurt today with all of the chiefs talking about the way modern central banks communicate their policy and while the discussion was lively, it offered little actionable data as central bank chiefs mainly talked about tactics rather than policy.
In US today the focus will turn to inflation data with PPI on the docket. The market is looking for core PPI to rise to 2.3% from 2.2% but the actual PPI is expected to decline to 0.1% from 0.4% and if the numbers come in as expected they may add to the pressure of the dollar as tepid inflation remains the primary barrier to any further tightening by the Fed. If on the other inflation surprises to the upside it could unleash a rally in USD/JPY with 114.00 likely taken out as higher yields and better inflation growth should allay some of the market skepticism towards the dollar.