British Pound, US Dollar Look to CPI Data to Guide Rate Hike Bets

Talking Points:

British Pound May Decline if UK Inflation Data Undermines BOE Outlook
US Dollar Gains Before CPI Data That May Boost Fed Rate Hike Chances
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UK CPI figures headline the economic calendar in European trading hours. The core year-on-year inflation rate is expected to print at 1 percent in October, unchanged from the prior month. UK price-growth data broadly deteriorated relative to consensus forecasts since mid-year even as economists have upgraded expectations, opening the door for a downside surprise. Such an outcome may dent BOE rate hike bets and weigh on the British Pound.

Later in the day, US CPI figures capture the spotlight. Core year-on-year inflation is projected to remain at 1.9 percent, putting it within a hair of the Fed’s 2 percent target. This hints that headline price growth is poised to recover as the overhang from last year’s crude oil plunge filters out of calculations in the months ahead. This would help set the stage for a rate hike and may push the US Dollar higher. Indeed, the greenback rose alongside Treasury bond yields overnight, seemingly in anticipation of the CPI release.

The New Zealand Dollar underperformed in overnight trade. Prices fell alongside a drop in front-end bond yields, hinting at a dovish shift in RBNZ monetary policy bets as the likely catalyst. Traders now price in at least one 25bps interest rate cut over the coming 12 months, with an implied probability of 50 percent of seeing the move at next month’s meeting.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

21:30

AUD

RBA’s Kent Speaks at Sydney Conference

–

22:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

115.9

–

116.6

23:50

JPY

Housing Loans (YoY) (3Q)

2.4%

–

2.4%

00:30

AUD

RBA November Meeting Minutes

–

02:00

NZD

RBNZ 2yr Inflation Expectation (4Q)

1.85%

–

1.94%

04:00

JPY

Tokyo Condominium Sales (YoY) (OCT)

-6.5%

–

-27.2%

European Session

GMT

CCY

EVENT

EXP

IMPACT