Sterling steady ahead of UK inflation data

12 December, 2017

Sterling steady ahead of UK inflation data

Asian equities lost momentum Tuesday despite U.S. stocks ending Monday at record highs. Traders shrugged off a Manhattan Subway explosion, in what was called a terrorist attack, but trading volumes were low ahead of the final round of central bank meetings for 2017. Energy stocks are outperforming other sectors as Brent crude climbed to its highest level since June 2015, on the shutdown of the Forties North Sea pipeline. Brent traded above $65.70 and widened the spread with WTI to $7.21, a level last seen in August 2015. Such a reaction indicates that supply disruptions can no longer be ignored in tight markets.

In currency markets, traders are on stand-by. The dollar is moving in very narrow ranges ahead of the Fed’s monetary policy decision on Wednesday. A 25-basis points rate hike is completely priced in the dollar, so traders should take their signals from different catalysts. Chair Janet Yellen’s tone, economic projections, and the dot plot are what’s going to drive the dollar for the remainder of 2017. Given that we’re getting closer to a deal on tax reforms, the Fed might become slightly more hawkish and ignore the stubbornly low wage growth. Whether this will lift the central bank’s growth projections and the dot plot, remain to be seen, but chances are high.

Having successfully moved into phase 2 of Brexit talks, the focus will shift back to economic data in the UK. Today’s November CPI will likely be a market moving indicator for Sterling. A rise above 3% in inflation requires Mark Carney to write a letter to the chancellor explaining why inflation is above its 2% target. I think chances of UK CPI exceeding expectations are high given the surge in oil prices. This will likely provide short-term support for the GBPUSD as traders will begin projecting another interest rate hike early 2018.

After surging to a new all-time high on Monday, Bitcoin fell below $16,000 today, before recovering some of its losses. The CBOE’s bitcoin futures launched on Monday, proved to be more volatile than the original asset itself, although futures contracts are meant to tame volatility. I think it’s we get there. The fear of short sellers attacking the bitcoin didn’t arise yesterday, indicating that the cryptocurrency isn’t seen yet as the big short. However, what scares me now is that people are taking out mortgages in order to buy bitcoins according to U.S. securities regulator, and this is not a good sign.


Source link  
Investors no surprised by earnings surprises

Wall Street ended mixed on Monday as tech stocks continued to lead the major indices. The S&P 500 finished flat at 2,670, with the 1.07% gain...

It's number 3 again!

Number 3 has been of crucial significance in 2018. Trump has been predicting that his policies would bring an increase in annual growth to over than 3% a year. The Federal Reserve is expected...

Global markets start the week off strong

Global investors are looking unfazed at the start of the week as global equity markets lifted and the USD continued to lose ground in the Monday session...


Xi Jinping provided equity bulls a boost

Appetite for risk bolstered Tuesday morning, as Chinese President Xi Jinping offered plans to further open up the second largest economy...

US markets continue to shine

Large swings in the equity markets have been the recipe of the day recently, as they swung lower on the back of political tensions in the US markets...

Global markets consolidate

Investors are likely to have breathed a sigh of relief after the US stock markets’ worst start to the second quarter since the 1929 Great Depression...


S&P 500 breaks 200 day moving average

Easter Monday is normally characterised by light trading, but today was anything but out the ordinary, as the US equity markets swung...

Attention turns back to data this week

Asian equities kicked off Q2 on a positive note, taking their cue from Wall Street’s rally on Thursday. The gains came despite China imposing...

US data fails to impress markets

It has been a positive day for the American economy as US GDP was stronger than expected coming in at 2.9% (2.7% exp), show casing...

  


Share: