Home Daily Commentaries Markets await Eurozone inflation data

Markets await Eurozone inflation data

Daily Currency Update

The pound remains rangebound versus the USD and euro at present in the absence of any top tier released hitherto this week. GBP/USD has slipped back under 1.20 which is likely due to some poor manufacturing data released in China seeing the safe haven USD sought by investors. Bank of England Governor, Andrew Bailey spoke before the House of Lords Economic Affairs Committee yesterday and revealed the level of dysfunction that was seen before September's disastrous mini-budget unveiled by former Chancellor of the Exchequer, Kwasi Kwarteng which sent GBP/USD to an all-time low below 1.04. Bailey confirmed to the committee that the vast majority of the content of the mini-budget was unknown to the Bank, which is not the usual protocol, and that members of the Banks Monetary Policy Committee and the Office for Budget Responsibility learned of the plans as they were unveiled in parliament. Bailey didn't disclose too much on potential future interest rate policy moves so the pound wasn't really affected by the discussion and with little domestic data due for the rest of the week it will likely be more external factors that influence its value. GBP/USD currently trades around 1.1965 with GBP/EUR around 1.1560.

Key Movers

Today’s big event from the Eurozone is the release of the latest inflation numbers which are expected to show that CPI has moderated slightly from 10.6% to 10.4%. On Monday European Central Bank president, Christine Lagarde indicated that she wishes to push ahead with another 75bp hike in interest rates at its December meeting given how quickly prices are rising. That said, yesterday's Spanish and German inflation numbers came in under expectations so should today’s number also undershoot the chances of a more conservative 50bp hike will increase. From the States this evening sees Chairman of the Federal Reserve, Jay Powell speak at the Brooking Institute in Washington. The discussion is to be focused on the US economy and therefore commentary on future policy moves by the Fed will likely be on the agenda. At lunchtime, we have ADP Non-Farm Employment Change data which is expected to show 196k were added to payrolls in November. We also have the second reading of Q3 GDP which is predicted to be revised upwards to 2.8% y/y from the initial estimate of 2.6%. In China civil unrest continues in the face of the government’s zero-Covid policy. The lockdowns seem to be impacting economic output as its latest Manufacturing PMI showed. November’s print came in at 48 lowers than the 49 forecasts and well below the 50 that divides contraction and expansion. EUR/USD is down a touch to 1.0370.

Expected Ranges

  • GBP/USD: 1.1940 - 12065 ▼
  • GBP/EUR: 1.1490 - 1.1660 ▼
  • GBP/AUD: 1.7740 - 1.7940 ▼
  • EUR/USD: 1.0315 - 1.0440 ▼