UK CPI, Salzburg Meeting in Focus

GBP/USD eked out a new 7-week high overnight. UK CPI and headlines from the EU meeting in Salzburg are key today.

Previous Day's Market Highlights

Exchange rate movements in our main pairs were relatively contained yesterday in light of a quiet data calendar and a lack of surprise headlines. Sterling-dollar held above 1.31, eking out a new seven-week high in overnight trading, and euro-dollar traded either side of 1.17. Sterling-euro touched new seven-week highs in the 1.12-1.13 range. Sterling has regained around 4% against the dollar since lows hit in August on the back of rising no-deal Brexit fears.
 
Trade tensions continued to build between the US and China, but the overall market impact was relatively limited after an initial knee-jerk reaction. Chinese Premier Li Keqiang has said that China won’t depreciate the yuan to boost exports, and the comments strengthened the yuan as well as the Aussie and kiwi dollars.
 
The Aussie also broadly benefited from reasonably upbeat RBA meeting minutes; while the Bank expects rates to remain on hold for the time being, the next move is likely to be a hike. Elsewhere, the Bank of Japan kept monetary policy on hold, as was widely expected. The Bank reiterated that it expected to keep interest rates low “for an extended period”. Inflation has remained stubbornly subdued, running below 1% compared to a 2% target rate.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1238 1.1280 1.0991 2.56%
GBP/USD 1.3149 1.3175 1.2785 2.96%
EUR/USD 1.1678 1.1734 1.1526 1.77%
GBP/AUD 1.8161 1.8401 1.7508 4.85%
GBP/NZD 1.9919 2.0031 1.9167 4.31%
GBP/CAD 1.7035 1.7190 1.6596 3.46%

Today's Market Highlights

Softer inflation data could weigh on the pound this morning (09:30 BST), particularly if the figures miss forecasts. Today also marks the first of a two-day informal meeting of EU leaders in Salzburg. Topics include migration and Brexit, and markets will be closely watching for any headlines on Brexit negotiations, particularly regarding the Irish border or an additional November summit. A deal by the preferred October deadline has seemed increasingly unlikely.
 
ECB President Draghi is to give the keynote speech at the “Making Europe’s Economic Union Work” conference in Berlin. Markets will keep an eye out for any monetary policy implications. Overnight, an acceleration in Q2 economic growth could strengthen the kiwi dollar.

Today's Economic Calendar

Time Currency Release Consensus Previous
9:30am GBP CPI YoY (Aug) 2.4% 2.5%
9:30am GBP Core CPI YoY (Aug) 1.8% 1.9%
1:30pm USD Building Permits MoM (Aug) 1.310M 1.311M
1:30pm USD Housing Starts MoM (Aug) 1.235M 1.168M
1:30pm USD Current Account (Q2) $-103.5B $-124.1B
2:00pm EUR ECB President Draghi Speaks
3:30pm USD EIA Crude Oil Inventories -0.805M -5.296M
11:45pm NZD GDP QoQ (Q2) 0.8% 0.5%
11:45pm NZD GDP YoY (Q2) 2.5% 2.7%
2:30am AUD RBA Bulletin

Caxton