Attention Shifts to US After UK CPI Steady

Sterling temporarily picked up as CPI held steady. US CPI and Retail Sales are in focus today.

Previous Day's Market Highlights

UK inflation unexpectedly held steady at 3.0% in January; economists had forecast that CPI would fall to 2.9%. As signs of rising inflation puts pressure on the BoE to raise interest rates and inflation has been above the 2.0% target rate since last February, the pound rallied around the release. However, it reversed gains later in the session.
 
Sterling-dollar temporarily reclaimed 1.39, while sterling-euro continued to trade in the 1.12-1.13 range and euro-dollar rallied further above 1.23 on a softer dollar.
 
Fed Member Mester said yesterday that she favours a similarly gradual pace as that seen in 2017, when the Fed raised rates three times.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1231 1.1512 1.1221 2.53%
GBP/USD 1.3896 1.4346 1.3756 4.11%
EUR/USD 1.2373 1.2538 1.2165 2.97%
GBP/AUD 1.7654 1.7861 1.7275 3.28%
GBP/NZD 1.9019 1.9466 1.8933 2.74%
GBP/CAD 1.7485 1.7646 1.7059 3.33%

Today's Market Highlights

Today marks a busier calendar day. The second estimate of the Eurozone’s Q4 GDPcomes out this morning (10:00 GMT), and the euro could strengthen on any upwards revisions. A strengthening economy has been one of the factors supporting the argument that the ECB should make monetary policy less accommodative. December Industrial Production will also be released.
 
In the afternoon, attention turns to the US for January Retail Sales and CPI figures (13:30 GMT). Slower Sales and inflation signals could weaken the dollar this afternoon. The implications for monetary policy will be particularly closely watched in light of recent bond and stock market volatility.
 
While there are no major UK releases today, markets will keep an eye on comments from Foreign Secretary Boris Johnson. Brexit uncertainty and domestic political discord have been pressures on the pound and continue to pose a risk.
 
Overnight, Australia is to release January jobs data. The Unemployment Rate is forecast to fall to 5.3% from 5.5%, which could strengthen the Aussie. However, the greater risk may be to the downside should market expectations be disappointed.

Today's Economic Calendar

Time Currency Release Consensus Previous
10:00 EUR GDP s.a. QoQ (Q4) 0.6% 0.6%
10:00 EUR GDP s.a. YoY (Q4) 2.7% 2.7%
10:00 EUR Industrial Production w.d.a. YoY (Dec) 4.2% 3.2%
10:20 EUR ECB's Mersch Speaks
12:45 EUR ECB's Mersch Speaks
13:30 USD CPI YoY (Jan) 1.9% 2.1%
13:30 USD Core CPI YoY (Jan) 1.7% 1.8%
13:30 USD Retail Sales MoM (Jan) 0.2% 0.4%
13:30 USD Core Retail Sales MoM (Jan) 0.4% 0.4%
15:30 USD EIA Crude Oil Inventories (9 Feb) 2.600M 1.895M
00:00 AUD Consumer Inflation Expectations (Feb) 3.7%
01:30 AUD Unemployment Rate s.a. (Jan) 5.3% 5.5%
01:30 AUD Employment Change s.a. (Jan) 25.5K 34.7K

Caxton