The British Pound may not find lasting weakness in soft UK inflation data considering the outcomes’ limited impact on near-term Bank of England monetary policy bets.
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British Pound May Not Find Lasting Weakness in Soft UK Inflation Numbers
Yen Falls as S&P 500 Futures Rise, NZ Dollar Declines on RBNZ Outlook
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December’s UK CPI data headlines the economic calendar in European trading hours. Expectations call for the headline year-on-year inflation rate to edge downward to 0.7 percent, the lowest in over 12 years. A soft result may not yield significant downside pressure on the British Pound however.
The core CPI reading (which excludes the impact of energy prices, among other volatile items) is seen edging upward to 1.3 percent from the 1.2 percent reading posted in November. This suggests that – similarly to the Federal Reserve – the Bank of England may chalk up the slide in headline price growth to the transitory impact of the sinking cost of crude oil, meaning it won’t necessarily interpret a weak result as reason enough to delay interest rate hikes.
The Japanese Yen underperformed in otherwise quiet overnight trade, rising as much as S&P 500 futures recovered, pointing to firming risk appetite and putting pressure on the safety-linked currency. The New Zealand Dollar likewise traded lower as the island nation’s bond yields fell, hinting at ebbing RBNZ interest rate hike expectations. We have entered short NZDUSD.
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