UK Inflation sends Sterling tumbling

Yesterday’s markets

14th October 2015

  • CHF PPI m/m: -0.1%
  • UK CPI y/y: -0.1%
  • UK BoE Credit Conditions Survey
  • UK PPI Input m/m: 0.6%
  • UK RPI y/y: 1.0%
  • German ZEW Economic Sentiment: 1.9%
  • CNY CPI y/y: 1.6%

UK CPI dominated yesterday’s headlines after inflation in the United Kingdom turned negative for only the second time since 1960. The Bank of England has warned that continued low inflation will persist into 2016, however the poor reading still sent Sterling tumbling against the majority of its counterparts. Consumer prices missed economist’s consensus and posted a -0.1% on an annual basis. Clothing and gasoline are continuing to have the biggest downward impact on UK inflation.

Despite the poor inflation performance, the Pound did receive a boost early yesterday morning as news emerged of a huge brewery deal involving SABMiller and Anheuser-Busch InBev. Sterling before the CPI number hit its highest level against the Dollar in nearly a month after SABMiller finally accepted a takeover proposal from Anheuser-Busch InBev in a deal worth £69 Billion.

On other news, the German ZEW economic sentiment further declined in October 2015, missing expectations and declining by 10.2 points to 1.9, a one year low. The exhaust gas scandal of Volkswagen and the weak growth of emerging markets has dampened economic outlook for Germany. On the upside, domestic economy performance is still positive and the Eurozone continues to recover making it unlikely that Germany will slide into recession. 

Today’s markets

13th October 2015

  • UK Average Earnings Index 3m/y
  • UK Claimant Count Change
  • UK Unemployment Rate
  • US Core Retail Sales m/m
  • US PPI m/m
  • US Retail Sales m/m
  • AUD Employment Change
  • AUD Unemployment Rate

Today is arguably the biggest day in terms of data from both sides of the pond. In the UK, the focus will be on the labour data with the release of the claimant count, unemployment rate and average earnings. Metrics from the UK labour market are expected to be positive. If this is the case the hawks will keep the prospect of an early rate hike on the periphery. The US data will be focused on inflation and retail sales, both will need to be positive to keep the markets guessing on a December “lift off”.