Article Highlights

  • U.K. Consumer Price Index m/m: 0.2% vs. 0.1% expected, 0.3% previous
  • U.K. Consumer Price Index y/y: 1.0% vs. 0.9% expected, 0.6% previous
  • U.K. Core Consumer Price Index y/y: 1.5% vs. 1.4% expected, 1.3% previous
  • U.K. Producer Price Index Input m/m: 0.0% vs. 0.2% expected, 0.4% previous
  • U.K. Producer Price Index Input y/y: 7.2% vs. 7.4% expected, 7.8% previous
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FX volatility was mainly in the British pound this morning, likely on the latest inflation situation updates, but we also saw moves in the euro and comdolls to give traders fresh opportunities.

Major Events/Reports:

U.K. Inflation – The British pound received a quick boost this morning after the latest numbers on inflation. We saw beats on almost all fronts on both expectations and previous reads, the exceptions coming from the producer prices side of the data. This is no surprise given the big 18% drop in the British pound since the Brexit vote this past Summer.

With prices ticking higher, it’s unlikely we’ll get a cut from the Bank of England in November, likely the reason for the small boost higher in Sterling pairs, roughly 0.30% – 0.40% across the board at the peak of the moves. But with a plethora of data coming in between now and the next inflation report and BOE meeting, it’s likely for today’s move to remain subdued, but we’ll see what U.S. traders think as their session opens up.

Risk-on session in Europe – Most of the major European equity indices are running higher to follow Asia’s lead, bouncing back from yesterday’s weak sentiment:

  • The pan-European FTSEurofirst 300 was up by 1.25% to 1,348.97
  • The blue-chip Euro Stoxx 50 was up by 1.25% to 3,046.28
  • Germany’s DAX was up by 1.23% to 10,632.96
  • The U.K.’s FTSE 100 was up 1.12% to 7,025.57

U.S. equity futures were not doing too well, however.

  • S&P 500 futures were down by 0.28% to 2,153.00
  • Nasdaq futures were down by 0.12% to 4,887.38

The broad rally in risk sentiment is mostly attributed to speculation that the Federal Reserve will stay with a gradual monetary policy tightening outlook, rather than an aggressive one as global inflation ticks higher. This can change quickly as we head into a U.S. economic calendar coming up with its own inflation data to assess.

Commodities get a lift – Commodities were broadly higher as well, riding the rising risk sentiment and weak Greenback during today’s morning London session.

Precious and base metals are up on the session:

  • Gold was up by +0.46% to $1,262.40 per troy ounce
  • Silver was up by +1.06% to $17.66 per troy ounce
  • Copper was up by +0.17% to $2.11 per pound
  • Nickel was up by 0.74% to $10,455.00 per dry metric ton

Oil benchmarks are solidly higher as well, likely on the latest inventory data suggesting the oversupply sentiment may be receding:

  • U.S. crude oil was up by +1.0% to $50.44 per barrel
  • Brent crude oil was up by +0.82% to $51.94 per barrel

Major Market Movers:

GBP – spiked higher after the positive inflation data, but subdued at the moment.

GBP/USD was up 86 pips (+0.71%) to 1.2268, GBP/JPY was up 99 pips (+0.78%) to 1.2268, EUR/GBP was down 54 pips (-0.61%) to 0.8969

USD – Fed speculation took the Greenback lower in Asia and London, but it’s gaining some ground as we head into U.S. trading:

USD/JPY was up 14 pips (+0.14%) to 104.02 after London session lows around 103.80, USD/CHF was up 10 pips (+0.11%) on the session, rallying from Asia lows around 0.9870

EUR – falling during London trade as risk sentiment rises:

EUR/USD was down from Asia highs (around 1.1025) to now trading around 1.1001, up on the session by only 2 pips (+0.0.02%) to 1.4674. EUR/JPY is also down from Asia session highs around 114.67, now trading around 114.36, up on 11 pip (+0.1%) today, and EUR/NZD is down 135 pips (-0.87%) to 1.5275

Watch Out For:

  • 12:30 pm GMT: U.S Consumer Price Index m/m (0.3% expected, 0.2% previous)
  • 12:30 pm GMT: U.S Core Consumer Price Index m/m (0.2% expected, 0.3% previous)
  • 2:00 pm GMT: NAHB Builders Survey Index (63 expected, 65 previous)
  • 8:00 pm GMT: U.S. Net Long-term TICS Flows ($103.9B previous)

See also:

Asian Session Forex Recap

U.S. Session Recap

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