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Price action was rather choppy during today’s morning London session, with many pairs trading sideways or showing two-way action, and some even ending up flat for the session.

Aussie pairs were clearly an exception, though, since the Aussie traded broadly higher against all its peers.

And while the pound also had choppy price action, it’s worth mentioning since price action on the pound was roughly uniform and largely in response to the latest U.K. CPI report.

  • U.K. CPI m/m: 0.3% vs. 0.2% expected, 0.1% previous
  • U.K. CPI y/y: 3.1% vs. steady at 3.0% expected
  • HPI in the U.K. y/y: 4.5% vs. 5.2% expected, 5.4% previous
  • U.K. PPI input m/m: 1.8% vs. 1.6% expected, 1.0% previous
  • U.K. PPI output m/m: 0.3% vs. 0.2% expected, 0.1% previous
  • ZEW Euro Zone economic sentiment: 29.0 vs. 30.2 expected, 30.9 previous
  • ZEW German economic sentiment: 17.4 vs. 17.6 expected, 18.7 previous

Major Events/Reports

U.K. CPI beats expectations

The U.K.’s November CPI report was released earlier during the session. And that revealed that headline CPI rose by 0.3% month-on-month, accelerating from the previous month’s +0.1% and beating forecasts for a 0.2$ rise to boot.

Year-on-year, headline CPI rose by 3.1%, which is the best reading since March 2012 and is better than consensus since economists forecasted that CPI will maintain the previous month’s annual pace of +3.0%.

More importantly, November’s annual headline reading of 3.1% is better than the BOE’s staff forecasts of +3.0%, as laid out in the BOE’s November Inflation Report.

Looking at the details of the CPI report, the 4.5% surge in transportation costs was the main driver for the uptick. And the surge in transportation costs, in turn, was due largely to air fares recovering by 0.9% after dropping by 2.5% previously.

Another major driver for November’s uptick was the 2.9% climb in the cost of recreational items, “most notably computer games.”

As a side note, the recent uptick above the BOE’s forecast means that BOE Guv’nah Carney will have to write a letter to Chancellor of the Exchequer Philip Hammond in order to explain why headline CPI has been way above the BOE’s 2.0% target for 10 consecutive months already. This letter won’t be released during this week’s BOE statement, though. Instead, the letter is expected to be published during next year’s February BOE statement.

Risk-friendly vibes in Europe

The major European equity indices had a soft start but later perked up and began climbing ever higher, so appetite was clearly the more dominant sentiment in Europe during the session.

Market analysts say that the risk-on vibes was due to deal-making activity and demand for energy shares because of the rise in oil prices, which then improved overall risk sentiment.

  • The pan-European FTSEurofirst 300 was up by 0.44% to 1,538.00
  • Germany’s DAX was up by 0.18% to 13,146.75
  • The blue-chip Euro Stoxx 50 was up by 0.33% to 3,594.50

U.S. equity futures were also in the green, but appeared reluctant since they only printed very modest gains.

  • S&P 500 futures were up by 0.05% to 2,665.75
  • Nasdaq futures were up by 0.01% to 6,416.63

Major Market Mover(s):


The Aussie has actually been climbing since the earlier Asian session and was second only to  the Kiwi back then.

However, the Aussie was finally able to outpace the Kiwi during today’s morning London session and is currently on track to finishing as the best performing currency of the day.

The risk-on vibes likely propped up the Aussie, although the recovery in gold prices also likely helped.

AUD/USD was up by 25 pips (+0.33%) to 0.7572, AUD/JPY was up by 29 pips (+0.34%) to 85.92, AUD/CHF was up by 21 pips (+0.29%) to 0.7506


The pound had choppy two-way action during the session. But it’s still worth mentioning since price action on the pound was somewhat uniform and the pound did somehow end up as the second best-performing currency after the Aussie.

The pound found bids ahead of the U.K.’s CPI report and then jumped higher as a knee-jerk reaction to the better-than-expected CPI readings.

However, pound bears quickly rushed in and tried to push the pound lower likely because, as some market analysts pointed out, the main drivers for the faster increase in inflation are air fares and computer games, which are very volatile, and are not likely to convince the BOE to hike further this week or next year since the BOE expects inflation to peak this year and then steadily fall back down to 2% next year.

Anyhow, pound bulls received reinforcement later, reversing the pound’s losses on most pairs.

GBP/USD was up by 22 pips (+0.17%) to 1.3364 with 1.3310 as session low, GBP/JPY was up by 27 pips (+0.18%) to 151.65 with 151.02 as session low, GBP/CHF was up by 16 pips (+0.12%) to 1.3248 with 1.3178 as session low

Watch Out For:

  • 1:30 pm GMT: Headline (0.4% expected, same as previous) and core (0.2% expected, 0.4% previous) readings for U.S. PPI
  • 7:00 pm GMT: ECB Overlord Draghi is scheduled to speak
  • 7:00 pm GMT: U.S. Federal Budget Balance (-$135.0B expected, -$63.2B previous)
  • 9:45 pm GMT: New Zealand’s FPI (-1.1% previous)
  • 10:15 pm GMT: RBA Guv’nah Lowe will be speaking