Poor inflation figure sends the Pound tumbling

Yesterday’s markets

16th August 2017

  • AUD - Monetary Policy Meeting Minutes
  • GBP - CPI y/y: 2.6%
  • USD - Core Retail Sales m/m: 0.6%

Yesterday’s economic calendar was jam packed with high tier data. Firstly, UK CPI posted a worse than expected figure of 2.6% YoY and even more surprising a -0.1% on the MoM. The poor inflation figures have given further evidence for the Bank of England to sit on their hands and leave rates on hold for the rest of the year. The slightly bearish reading sent the Pound lower against the Dollar and Euro, breaking a key psychological level against the Greenback. In the afternoon, the US released July’s retail sales reading. The figure posted a much better than expected 0.6%, adding to the strong Dollar trend we saw yesterday.

The UK government is set to release a series of documents this week regarding the UK’s new post-Brexit position regarding trade. It wants to maintain tariff free for a period post Brexit. This is an ideal situation for the UK. However, the EU feels that the UK Government s asking for too many of the membership benefits without a membership. Divorce talks are set to resume August 28th, where we will see how much the E.U is willing to give the U.K or will the U.K rethink its trade future which could be costly if the EU is not willing to compromise.

Today’s markets

15th August 2017

  • GBP - Average Earnings Index 3m/y
  • USD - Building Permits
  • NZD - PPI Input q/q

On Wednesday, the UK release a raft of high tier labour data, in the form of the Unemployment Rate and Average Earnings Index. Both readings are forecast to remain sticky at the previous levels of 4.5% and 1.8% respectively. In the evening, arguably the biggest piece of data of the week; the FOMC minutes will be released. Markets will be keen to decipher the tone of the Fed to gain an idea on the Feds rate rise plans.