The US Dollar and the British Pound may decline as soft UK and US inflation figures undermine Fed and Bank of England interest rate hike speculation.
Talking Points:
British Pound May Extend Losses as Soft CPI Undermines BOE Rates Outlook
Overnight US Dollar Weakness May Continue as PPI Drop Weakens Fed Bets
See Economic Data Flow Directly on Your Charts with the DailyFX News App
October’s UK CPI figures headline the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to print at 1.2 percent, unchanged from the five-year low recorded in the prior month. Leading survey data hints a downside surprise may be in the cards however. PMI figures from Markit Economics suggest output prices in the service sector fell for the first time in 17 months in October while those on the manufacturing side rose at the slowest pace in since June 2013. A soft outcome is likely to pour cold water on BOE rate hike speculation, weighing on the British Pound.
Later in the day, the spotlight shifts to US PPI figures. The year-on-year wholesale inflation rate is seen slowing to 1.3 percent in October, marking an eight-month low. Leading indicators reinforce the probability of a downtick, showing factory-gate prices in the manufacturing sector rose at the slowest pace in four months in October. Service-sector pricing trends likewise pointed to moderation over the same period.
Investors may interpret a weak result as suggesting that the Fed will be relatively slow to issue its first post-QE interest rate hike, punishing the US Dollar. In fact, ebbing support from the policy outlook already appeared to sting the greenback overnight, with prices edging lower alongside the benchmark 10-year Treasury bond yield. Follow-through may prove limited however as markets await the release of minutes from October’s FOMC meeting on Wednesday before showing directional commitment.
FXCM, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials. FXCM, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXCM, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
Recommended Content
Editors’ Picks
USD/JPY flat-lines below 151.50 after soft Japanese CPI data
USD/JPY stays defensive below 151.50 after the release of a soft Japan's CPI report and mixed Industrial Production and Retail Sales data on Friday. Japanese verbal intervention also weighs on the pair amid the holiday-thinned conditions on Good Friday. US PCE inflation awaited.
AUD/USD buyers lack vigor above 0.6500 amid Good Friday trading lull
AUD/USD is trading listlessly above 0.6500 in the Asian session amid light trading on Good Friday. The Aussie pair shrugs off encouraging comments from China's FX regulator, as price action remains subdued ahead of the US PCE inflation data.
Gold flirts with record highs above $2,230, all eyes on US PCE data
Gold price flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve.
Optimism price could fall as nearly $90 million worth of OP tokens is due flood markets
Optimism volatility has shrunk in the ours leading to the network’s cliff unlock. It joins the likes of dYdX and Sui, which have similar events on their calendars. As token unlocks are often considered bearish catalysts, investors should brace for a reaction after the event.
Will they won’t they cut rates is the question of Q2?
There has been some significant push back from Fed and Bank of England members around the timing of rate cuts, and the Bank of Japan still haven’t physically intervened in the FX market to stem yen weakness although they are threatening to do so.