bank of england

Inflation still moving higher

13th December 2017 Market Update

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?? GBP – Inflation was the key piece of data yesterday after it unexpectedly rose to 3.1% which is its highest level in 6 years, although it is moving further away from target Mark Carney is expected to be upbeat in his last MPC meeting of 2017 on Thursday.

Today the UK will release its unemployment rate which is expected to improve to a new low of 4.2% and average earnings are expected to remain the same. Possibly a solid day ahead for the pound.

?? EUR – No real data was released yesterday from Europe and it was only the ECB meeting for the market to focus on which didn’t provide anything in the way of monetary policy.

Employment change is to be released later this morning and is expected to remain at 0.4%, industrial production will also be out and is expected to improve to 3.5%.

?? USD – There wasn’t much in the way of data from the US yesterday so it traded in line with GBP and EUR moves.

Today is a big day for the US, inflation figures are out this afternoon which are expected to increase to 2.2%. The bigger news of course is that the Fed are expected to raise interest rates from 1.25% to 1.50% it is believed that this is widely priced in but there will likely be an immediate market reaction. It is unlikely the outgoing Fed chair Yellen will provide any firm forward guidance.

 

Key Announcements

?? GBP
09:30am: Average earnings – expected to remain at 2.2%
09:30am: Unemployment rate – expected to improve to 4.2%

?? EUR
10:00am: Industrial production – expected to improve to 3.5%
10:00am: Employment change – expected to remain at 0.4%

?? USD
13:30pm: Inflation expected to rise to 2.2%
13:30pm: Fed interest rate decision – expected to rise from 1.25% to 1.5%

 

Summary: Yesterday inflation rose in the UK to its highest level in 6 years, and the pound unexpectedly rose immediately after the figure was released. The moves retraced throughout the day however. Mario Draghi chaired the final ECB meeting although there were no comments on monetary policy outlook – the euro fell marginally afterwards.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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