- U.K. CPI m/m: 0.7% vs. 0.5% expected, -0.5% previous
- U.K. CPI y/y: 2.3% vs. 2.1% expected, 1.8% previous
- U.K. core CPI y/y: 2.0% vs. 1.7% expected, 1.6% previous
- Public sector net borrowing in the U.K.: £1.1B vs. £2.9B expected, -£11.7B previous
- U.K. HPI y/y: 6.2% vs. 6.4% expected, 5.7% previous
The pound, the euro, and the Loonie battled for supremacy during today’s morning London session. But in the end, there can be only one, and that happened to be the pound.
U.K. CPI exceeds BOE target – The U.K.’s inflation report for February got released during the session. And, well, the month-on-month reading printed a 0.7% rebound after sliding by 0.5% back in January. This is also a faster increase than the +0.5% consensus and is the fastest monthly increase since April 2013 to boot.
Year-on-year, CPI in came in at 2.3%, beating expectations for a 2.1% increase. This marks the fourth consecutive month of ever higher year-on-year readings. Moreover, February’s reading is the highest since September 2013. And more importantly, the reading is already above the BOE’s 2.0% target, as well as the BOE’s own forecast of 2.1%.
Looking at the details of the report, the main contributor to the faster year-on-year increase happens to be the transport component, which rose by 1.2% and added 0.15% to CPI. Rising fuel prices were mentioned as the main reasons for the higher transportation costs. Moving on, more expensive personal computers pushed higher the overall cost of recreation and entertainment. And the recreation and entertainment component was the second major driver, adding 0.08% to CPI. Higher food prices also drove CPI higher, adding 0.06% to CPI.
Anyhow, most other CPI components also printed increases. There were only four CPI components that didn’t see an increase. And even then, these four components were not drags, since they were roughly flat.
Oil recovers – After getting clobbered pretty hard yesterday, oil benchmarks staged a recovery during today’s morning London session. Other commodities, meanwhile, were mixed but mostly down.
- U.S. WTI crude oil was up by 0.76% to $49.28 per barrel
- Brent crude oil was up by 0.77% to $52.02 per barrel
Market analysts say that oil’s recovery was due to renewed optimism after rumors began to spread that OPEC may extend its oil cut deal beyond June.
French election debates aftermath – A lot of things were discussed, so I won’t be detailing what the French presidential hopefuls were debating about (aussi parce que je ne comprends pas français).
But according to media outlets like Reuters and Bloomberg, post-debate polls are showing that Macron was either viewed as the most convincing, or even the outright winner of the debate. This is obviously goods news for those who want to maintain the status quo, or who just don’t want to see anti-EU Marine Le Pen in power.
Risk appetite returns – Signs of risk-taking began to pop up in Europe during the session, as European equity indices began glowing green.
- The pan-European FTSEurofirst 300 was up by 0.18 to 1,491.04
- Germany’s DAX was up by 0.15% to 12,070.50
- The blue-chip Euro Stoxx 50 was up by 0.46% to 3,456.50
U.S. equity futures also got supported by all that optimism.
- S&P 500 futures were up by 0.21% to 2,375.25
- Nasdaq futures were up by 0.24 to 5,431.38
Market analysts attributed the returning risk-on vibes on recovering oil prices and the aftermath of the French presidential debates, which boosted energy shares and banking shares respectively.
Major Market Mover(s):
GBP – The pound got a major bullish infusion after the CPI report was released. Aside from the inherent importance of the CPI report, recall that the minutes of last week’s BOE meeting noted that “some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.” The better-than-expected CPI readings therefore very likely fueled rate hike expectations from the BOE as well. And that’s probably why the pound’s bullish reaction was extra strong.
GBP/USD was up by 91 pips (+0.73%) to 1.2462, GBP/JPY was up by 92 pips (+0.65%) to 140.28, GBP/CHF was up by 82 pips (+0.67%) to 1.2406
CAD – The Loonie ended up as the second strongest currency of the session after edging out the euro. As to what fueled demand for the Loonie, that was very likely due to the recovery in oil prices.
AUD/CAD was down by 3 pips (-0.03%) to 1.0295, NZD/CAD was down by 6 pips (-0.07%) to 0.9391, CAD/JPY was up by 16 pips (+0.18%) to 84.55
EUR – Risk appetite was the more dominant sentiment in Europe, but the lower-yielding euro still ended up a net winner. And that’s thanks to relief that Macron is seen to be the winner of the French presidential debates, market analysts say.
EUR/USD was up by 35 pips (+0.32%) to 1.0807, EUR/JPY was up by 33 pips (+0.26%) to 121.67, EUR/CHF was up by 15 pips (+0.15%) to 1.0760
USD – I only pointed out the winners, so let’s even it out a bit by pointing out the big loser. And, well, that happens to be the Greenback. There were no apparent catalysts for the Greenback’s broad-based weakness, but market analysts placed the blame on growing doubts that the Fed will increase the pace of tightening.
USD/CAD was down by 35 pips (-0.26%) to 1.3313, USD/JPY was down by 10 pips (-0.09%) to 112.55, USD/CHF was down by 19 pips (-0.19%) to 0.9955
- 12:30 pm GMT: Headline (1.5% expected, -0.5% previous) and core (1.3% expected, -0.3% previous) readings for Canadian retail sales
- 12:30 pm GMT: U.S. current account (-$129B expected, -$113B previous)
- Dairy auction currently underway (-6.3% previous); auction usually ends at around 2:00 pm GMT
Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.
Head on to Big Pippin’s Daily Chart Art for some pip-locking technical weeks!