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Inflation dominates price action

  • GBP - CPI y/y: 1.8%
  • USD – PPI m/m: 0.6%
  • USD – Fed Chair Yellen Testifies
  • EUR – Flash GDP q/q: 0.4%
  • USD – Core PPI m/m: 0.4%
  • EUR – German Prelim GDP q/q: 0.4%

It was all about inflation yesterday as two pieces of high tier CPI data was released from China and the UK. Firstly, UK consumer price index failed to meet the high expectations of 1.9% yesterday morning, registering a 1.8%. Although undershooting the economists’ consensus, inflation has still reached its highest level for two and a half years as a result of the rising price of fuel and is now only 0.2% away from the Bank of England’s target. Sterling weakened drastically after the release of this worse than expected reading. In China, CPI continued to tick higher, exceeding economists’ forecasts by registering a 2.5%.

  • GBP - Average Earnings Index 3m/y
  • CAD - Manufacturing Sales m/m
  • USD – Core Retail Sales m/m
  • USD - Fed Chair Yellen Testifies
  • USD – Crude Oil Inventories
  • AUD – Employment Change

Across the pond, US politics continue to dominate the airwaves. US National Security Adviser Michael Flynn resigned yesterday over allegations he discussed US sanctions with Russia before President Trump took office. Mr Flynn allegedly encouraged a softer policy on Russia and a harder line on Iran. Flynn is believed to have misled officials about his conversations with Russian ambassadors.

A more hawkish Janet Yellen last night testified before the Senate Banking Committee in Washington.  Fed Chair Janet Yellen, said that the Fed would probably need to raise interest rates at an upcoming meeting, as to delay rate increases that could leave the central bank’s policymaking committee behind the curve.

An insight into the UK’s labour market will be in focus this morning, with Average Earnings and the Unemployment Rate both expected to remain in line with last month’s figures.  The only change due to be seen is the amount of people claiming benefits, which is set to increase by 1.1k.  The States then takes center stage for the rest of the day as their monthly inflation gauge is posted, along with the monthly Retail Sales.  Consumer spending is set to fall from the previous reading of 0.6% to 0.1% which could have a negative impact on the Dollar.  Janet Yellen will also testify again in Washington, similar to Tuesday’s events.