• UK CPI inflation rises to 2.9%
  • Euro struggles on thin data
  • Easing of Irma threats allows USD to breathe

Sterling jumps on better than expected CPI inflation

The pound posted a mixed performance yesterday, losing nominal ground against the dollar after gaining in the early part of the day and gaining over 0.35% against the euro.  A lack of economic data releases left focus falling to wider markets. However, positive sentiment towards the pound from last week likely provided the currency with a modicum of support.

This morning we have had the release of CPI inflation, which came out above expectations and rose by 0.1% more than expected to 2.9%. This has seen the pound gain significant ground across the board, up an average of 0.6%

With inflation remaining above the central bank’s 2% target, traders will be looking to gauge the MPC’s opinion towards letting the economy run hot while balancing it against lagging wage growth.

Euro struggles on lack of data

The euro continued to disappoint yesterday, losing over 0.35% against the pound and over half a percent against the dollar. A fall in Italian industrial output applied some pressure on the currency in the early parts of the day’s trading, which was backed up by continued disappointment following the ECB meeting last week.

A lack of economic data releases today is likely to push focus towards tomorrow’s German inflation data. With the expectation for a stagnant 0.1% number on the monthly figure and 1.8% on the annualised number, some may begin to feel that the ECB’s decision to delay tapering the quantitative easing programme is valid and could apply yet more downside on the currency.  

Greenback steadies as threats ease

The dollar posted a broadly positive performance yesterday. Against the pound it gained a nominal amount of ground and rose over half a percent against the euro. While a lack of economic data releases failed to provide the currency with much support, receding fears over North Korea and the strike of Hurricane Irma allowed the greenback some respite.

Today we have the release of JOLTS job openings. However, given the poor non-farm payroll number from last week, this may have a limited impact regardless of the outcome. It is likely that investors are now looking towards Thursday’s inflation numbers to drive any real USD strength, which may leave the currency vulnerable to wider market pressures. 

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