Another turbulent day for sterling as a number of data releases hit the market sending the pound from daily highs to weekly lows against the euro and US dollar. Consumer prices in the UK rose in September at the fastest annual rate for more than 5 years, reiterating expectations the BoE may nudge up interest rates up as early as next month.
The Office of National Statistics published figures that showed inflation reached 3% in September, this is the fastest pace of growth in prices and goods and services since 2012. Whilst inflation has accelerated since last year’s Brexit vote, driven by the pound’s decline, unemployment has fallen to a 40 year low, absorbing labour market-slack that would normally restrain domestic cost pressures.
Sterling opened at 1.1236 against the euro and continued to climb to the day’s high of 1.1288 before diving after comments made by the BoE policy makers were interpreted by the market to close 1.1216
Against the US dollar, the pound opened the session at 1.3253 rising to the day’s high of 1.33105 before falling to close the day at 1.3184
German ZEW economic sentiment survey improved slightly over last results coming in at 17.6 (versus 17) but failed to hit the expected 20 points. Similarly, the sub-index current conditions unexpectedly dropped to 87.0 versus 89.0 as expected.
In the US, Industrial Production figures showed the sector grew 1.6% YoY in September, following a revised figure of 1.2% in August. This was attributed to a rise in manufacturing and mining output, whilst utilities continued to fall. US exports and imports prices increased by 0.8% and 0.7% MoM in September respectively, both beating market expectations of 0.5%. It was the largest monthly rise in export and import prices since Jun-16.
Attention now points towards President Trump’s meeting with Fed Chair Janet Yellen set to commence on Thursday to discuss her replacement. Reports point towards the more hawkish stance of Stanford economist John Taylor as the more likely of the current shortlist. News regarding the Fed chairmanship is in constant flux and the market finds it hard to move significantly in either direction until further clarity is established.
EURUSD opened at 1.1757 and rose to a high of 1.1774 in the morning but as US data releases helped the dollar the pair fell to a 1-week low on of 1.1739