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UK Inflation and Brexit Talk Put the GBP in Focus, with One Eye on the EUR

Bob Mason
While we can expect some focus on the FOMC minutes, it’s all about the GBP and the EUR today, the EU Summit putting Brexit and Italy in focus.

Earlier in the Day:

There were no material stats released through the Asian session this morning to provide direction for the majors, leaving market risk sentiment and geo-political risk to influence in the early part of the day.

For the Kiwi Dollar, the better than expected 3rd quarter inflation figures from Tuesday and improved risk appetite in the early part of the day provided support, the Kiwi Dollar up another 0.23% off the back of a 1.03% gain, Monday through to Tuesday’s close. It remains to be seen whether the inflation figures are enough for the RBNZ to shift on policy when considering the widening of the trade deficit in August and continued decline in business confidence, particularly with the ongoing U.S – China trade war ongoing and concerns rising over the global economic outlook.

At the time of writing, the Kiwi Dollar was up 0.17% to $0.6585.

For the Aussie Dollar, the shift in risk sentiment was of less influence in the earlier part of the day, the RBA meeting minutes released on Tuesday pinning the Aussie Dollar back, with China’s GDP numbers due out on Friday expected to be of material influence.

At the time of writing, the Aussie Dollar down 0.10% to $0.7134.

For the Japanese Yen, the pickup in market risk appetite was telling through the early part of the day, with the Yen down 0.13% to ¥112.40 at the time of writing, with Tuesday’s stats out of the U.S also influencing early on, a jump in the JOLTs job openings and better than expected industrial production figures easing concerns of a near-term slowdown in the U.S economy.

In the equity markets, it was a positive start to the day, with the Nikkei and ASX200 surging by 1.75% and by 1.09%, supported by positive earnings results from Corporate America that managed to prise focus away from the ongoing trade war between the U.S and China and the IMF’s downgrade to global growth forecasts for this year and next.

With the HK markets closed for Chung Yeung Day, it was down to the Chinese markets to respond to the overnight rally in the U.S, the CSI300 up 1.28% at the time of writing.

The Day Ahead:

For the EUR, economic data scheduled for release through the European session is limited to finalized September inflation figures for the Euro bloc. While we can expect some support from the EUR should headline inflation rise in line with forecasts month-on-month, the key figure remains the core annual rate of inflation that continues to sit well below the ECB’s target.

While the stats may provide some support, it will be all eyes on Brussels, with some murmurs from the European Commission suggesting that the Italian budget is on its way to rejection, which would weigh on the EUR and the European equity markets should the chatter build through the day.

At the time of writing, the EUR down 0.02% to $1.1573.

For the Pound, economic data scheduled for release through the day includes September inflation figures and the BoE’s FCB minutes. Focus will be on the inflation numbers, which are forecasted to be negative for the Pound, while the BoE’s FCP minutes could put Brexit front and centre, as the British Prime Minister heads to the EU Summit in Brussels, with today considered to be one of May’s last opportunities to salvage a deal. The stats may have eased the pain for the Pound on Tuesday, but it could be a very different story today should there be no good news from Brussels.

At the time of writing, the Pound was up 0.02% to $1.3184.

Across the Pond, economic data scheduled for release is includes September building permit and housing start figures that will have some influence on the Dollar, with some concerns over the housing sector building in recent months. It may ultimately boil down to the FOMC meeting minutes due out later in the day however, though whether there are any surprises remains to be seen, the economic projections and recent comments from Powell suggesting it’s all systems go on the rate hike front. The minutes will be a reminder nonetheless of what’s to come.

At the time of writing, the Dollar Spot Index was up 0.03% to 95.078.

For the Loonie, there are no material stats scheduled for release, leaving the Loonie in the hands of market risk sentiment and the direction of crude oil prices through the day, the markets yet to have any meaty economic numbers to influence sentiment towards BoC monetary policy.

The Loonie was down 0.10% at C$1.2947 against the U.S Dollar at the time of writing.

This article was originally posted on FX Empire