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Could UK inflation force the BoE’s hand?

On Friday afternoon, we had the US release their Inflation data, which posted slightly worse than expected at 0.1%, instead of the predicted 0.2%. The Dollar reacted negativity and dropped across all pairs. It is thought that the fall was due to market concerns, which if continue, may have an impact on the Fed’s decision to raise rates for the third planned time in December. If the Fed decides to raise rates, the Dollar could be expected to fall even more due to uncertainty.


There is a quiet start to the week today with no high tier data on the economic docket. The US will release the Empire State Manufacturing Index Figure, expected to post at 20.3, whilst the Bank of Canada will be releasing their Business Outlook Survey. This evening New Zealand will release their inflation figure, which is due to increase on the quarter up to 0.4%.


Busy day in the UK on Tuesday with the release of the CPI figure, expected to increase to 3%. Such an increase would prompt Mark Carney, the Head of the BoE, to write a letter to the Chancellor of the Exchequer.  The letter will explain and detail the reasons as to why inflation is at or above 3%. This highly anticipated figure will be closely watched by the markets to see if it will provide further support for the BOE to raise interest rates next month. Also from the UK, BOE Governor, Mark Carney will be testifying before the Treasury Select Committee alongside Deputy Governor David Ramsden and external MPC member Silivana Tenreyro. The Eurozone will be releasing their final CPI figure alongside the German ZEW Economic sentiment.


On Wednesday, the morning’s focus will remain on the UK with the release of the Average Earnings Index, Claimant Count Change and Unemployment Rate.  Labour data will be looked to for any strength in earnings being seen, as inflation is near the 3% mark and a rate rise imminent. Earnings, if above the 2.1% expected, could firm the stance of the BoE to raise rates come November. Across the pond, FOMC members William Dudley and Robert Kaplan will be taking part in a panel discussion about leveraging the assets unique to each region and the impact of technology. The US will also release the building permits figure and the weekly Crude Oil Inventories.


Employment data will be posted in the early hours of the morning from Australia, with no change in the Unemployment Rate expected, it is set to remain at 5.6%.  The monthly UK Retail Sales is set to show sales for the month of September fell by 0.1%, which if seen here or worse could cause Sterling to weaken.  Across the pond, the US release their weekly Unemployment Claims figure, alongside the Philly Fed Manufacturing Index.


The final day of the week will end with little major high tier data.   The only data hitting the wires will be from Canada, with their Monthly Inflation gauge along with the Monthly Retail Sales.