The Pound gets a leg up

Yesterday’s markets

14th December 2016

  • GBP – CPI y/y: 1.2%
  • GBP – PPI Input m/m: -1.1%
  • USD – Import Prices m/m: -0.3%
  • JPY – Tankan Manufacturing Index: 10
  • JPY – Tankan Non-Manufacturing Index: 18

The UK dominated markets yesterday as we saw a key piece of inflation data released in the morning. UK CPI rose to 1.2% in November, exceeding economists’ consensus of 1.1%. Although the market has seen this uptick as positive for the Pound, the rise does suggest that the 2% level targeted by the Bank of England could soon come under pressure. It now seems almost certain that the BoE’s next move will be to raise rates as there is little to no wiggle room for another cut to interest rates. Sterling continued to tick higher after the relatively bullish news.

Sterling continued to trade higher against the majority of its counter-parties yesterday after a positive piece of high tier data and hawkish comments from UK lawmakers. UK lawmakers pushed the case for a transitional Brexit period that would allow for continued market access to the EU’s single market. The House of Lords and a senior Government member both look likely to push for an interim deal that will help the UK to remain a member of the single market until Brexit has been negotiated. The news gave the Pound a boost yesterday morning.

Today’s markets

13th December 2016

  • GBP – Average Earnings Index 3m/y: 2.5%
  • GBP – Claimant Count Change: 2.4K
  • GBP – BOE Gov Carney Speaks
  • USD – Core Retail Sales m/m
  • USD – PPI m/m
  • AUD – Employment Change 

Labour data from the UK is in focus today, with average earnings forecast to stay at 2.3% and unemployment to remain sticky at 4.8%.  Shortly after Mark Carney, the head of the Bank of England speaks in London and will have markets looking for any clues he may give on monetary policies.  Then the focus switches to the US, where firstly the monthly retail sales will be released but all eyes will be on the Fed meeting with rates expected to be increased from 0.5% to 0.75%.  If seen this could see the greenback strengthen, and with the statement from Janet Yellen due to follow, this will no doubt see further volatility for the dollar.