Could inflation force central banks to act?

The Pound continued to make gains on Friday following Trumps surprise election win. Sterling has seen a rise of 4% against the Dollar from where it was a month ago, and a 6% rise against the Euro which will bring some respite to importing businesses in the UK. This rebound comes off the back of Trump’s comments which indicated that America and the UK are to continue with their special relationship, which puts the UK in a positive place as it seeks to tie up trading agreements with the US after possibly exiting the EU.

Monday 

With no high tier data due to be released today, markets will await to see if the head of the ECB, Mario Draghi will make any comments on Brexit or anything on possible monetary policy actions as he speaks later this afternoon in Rome. As concerns ripple across the globe of protest votes against the establishments, this is having a negative affect for the single currency as it has been on the back foot after the US elections. As France have a presidential election early next year and Italy face a referendum on constitutional reform, there is the potential for this wave of populism to be seen in Europe when voters vote against the status quo.

Tuesday 

Inflation from the UK takes centre stage on Tuesday as Consumer Prices are due to increase slightly to 1.1%. With the Pound nosediving after the Brexit vote, the cost of importing goods has started to filter through to consumer prices, which have risen sharper than the BoE expected. A jump above the expected 1.1% would result in markets asking when and how the Bank of England might intervene. In the afternoon, the US will see how strong their consumer market is as they release the monthly Retail Sales figure, which is anticipated to remain constant at 0.6%.

  • UK CPI
  • Euro Flash GDP Q3
  • US Retail Sales m/m

Wednesday

An insight into the UK labour market comes into focus on Wednesday morning, with the release of the unemployment rate, average earnings and unemployment benefits. Unemployment and earnings are forecasted to remain as seen last time, with unemployment rate at 4.9% and earnings stuck at 2.3%. However, the number of people claiming unemployment benefits is set to increase by 1.9k. The US will post their monthly Industrial Production gauge and expect it to show a slight increase from previous 0.1% to 0.2%.

  • UK Average Earnings
  • UK Unemployment Rate
  • UK Claimant Count Change
  • US PPI m/m
  • US Industrial Production m/m
  • US Crude Oil Inventories

Thursday 

Inflation will be under the spotlight on Thursday as both the Eurozone and the US release their figures. Firstly, the single currency zone is set to see their yearly CPI figure remain at 0.4%, which will give some respite from deflationary pressures for the ECB to have to tackle. The US monthly Consumer Price gauge is anticipated to rise from 0.3% to 0.4%. This rise will again add further evidence for the FED to pull the trigger on a rate hike in December’s meeting. Leading into the afternoon, Janet Yellen the head of the Fed testifies in Washington about the economy outlook of the US.  Depending on Fed Chair Yellen’s tone, this will no doubt cause some volatility for the Greenback.

  • Euro CPI yoy
  • UK Retail Sales m/m
  • US CPI mom
  • US Janet Yellen Testifies

Friday

Friday will start with Mario Draghi, the head of the ECB speaking early morning in Frankfurt. As always, markets will watch for any clues on possible monetary policy changes.   

  • ECB President Mario Draghi speaking