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Sterling decline continues

  • GBP CPI y/y: 0.3%
  • GBP PPI Input m/m: 2.6%
  • GBP RPI y/y: 1.4%
  • USD Core Retail Sales m/m: 0.4%
  • USD Retail Sales m/m: 0.5%
  • USD Import Prices m/m: 1.4%

Sterling continued its decline yesterday as Brexit fears weigh on the Pound. The FTSE 100 index is also experiencing its longest run of declines for the year and gilts are rallying, as polling shows further support for the UK to leave the EU in next week’s Referendum. The bookies have now priced the leave camp in pole position, with the likelihood of the UK remaining in the EU down a massive 62%. Much more volatility is expected ahead of the plebiscite. 

In regards to data, there were two high tier data releases from the UK and US. Firstly, UK CPI disappointed, missing economists’ forecast and posting a reading of 0.3%. UK CPI is a key indicator of inflation and with this number declining to its joint lowest level since February, it adds further support for the BoE to hold off rate hikes this year and potentially for Q1 next year as well. Across the pond, the US posted a better than expected Retail Sales figure. Retail Sales in the US registered a reading of 0.5%, helping to support the Greenback yesterday afternoon.

  • USD PPI m/m
  • USD Core PPI m/m
  • USD Empire State Manufacturing Index
  • USD Capacity Utilization Rate
  • USD Industrial Production m/m
  • USD Crude Oil Inventories
  • USD FOMC Economic Projections
  • USD FOMC Statement
  • USD Federal Funds Rate
  • USD FOMC Press Conference

Tonight’s Fed meeting will be the day’s main focus. Investors will be looking for further guidance as to when the FOMC will raise rates. Market’s will be looking to see if this month’s poor labour data will have an effect on the Fed’s tone. The FOMC statement will be closely monitored as investors watch to see if the Fed’s dovish tone continues. Earlier in the day, labour data from the UK will be released with the Unemployment Rate expected to stay constant at 5.1%. The Average Earnings figure is also scheduled to be released, with the reading expected to slow from 2% to 1.7%.