Daily Brief

Nelson 3 - 0 Data

No worries about inflation

Once upon a time investors paid close attention to the economic fundamentals. These included things like growth, output, jobs, inflation - factors which affect, among other things, the course of UK monetary policy. This week they have ignored all of them. Yesterday's blind eye was turned towards a three-year low for inflation.

Traditionally, investors have marked sterling up or down in line with higher or lower rates of inflation and Wednesday's 1.5% headline rate for October would normally have meant a weaker pound. However, with Brexit looming over the economy, the Bank of England is unlikely to cut interest rates because a cap on utility prices is holding gas bills down. Yesterday's data did nothing to alter the picture painted last week by the Bank of England's Monetary Policy Committee and Monetary Policy Report. Some on the MPC are minded to cut interest rates but not simply because of soft consumer prices.

Sterling was on average unchanged on the day, flat against the euro and a quarter of a cent lower against the US dollar and Swiss franc. Since Monday morning, before the first set of dreary data emerged, it has strengthened by an average of 0.3%, losing out only to the franc and the NZ dollar.

Fed on hold

When Federal Reserve chairman Jerome Powell met the Joint Economic Committee on Capitol Hill he gave every impression that there are no further interest rate cuts in the pipeline. It was what investors had expected, and the US dollar is a fifth of a cent higher on the day.

Mr Powell said monetary policy "is not on a preset course", though the current setting is "likely to remain appropriate" until the incoming data make an adjustment necessary. He restated his opinion that the negative interest rates espoused by the US president would not be useful to the US economy.

The US consumer price index data underscored his stance, as headline inflation ticked up to 1.8% and the core reading remained above target at 2.3%. Other than some decidedly lukewarm Euroland industrial production data there were no more significant ecostats on Wednesday's agenda.

Germany dodges recession

Japan opened today's proceedings with an anaemic 0.1% expansion to gross domestic product in the third quarter. The RICS followed with another month of falling UK house prices. Australia lost 19k jobs in October. Chinese industrial production and retail sales missed forecast. But German GDP grew 0.1% in Q3, avoiding a technical recession. 

Of the data already released today, it was the Australian jobs numbers that had most impact. Even though investors are accustomed to the unpredictability of the readings, the fall in employment was well adrift from the predicted 15k increase. The Aussie lost a swift three quarters of a cent on the news, becoming the day's weakest performer.

Yet to come today are UK retail sales, Euroland GDP and Canadian house prices. Fed chairman Jay Powell will make his second appearance in Congress. Tomorrow brings euro zone inflation and US retail sales.

GBP: Sterling unhurt by lower inflation

GBP: Sterling unhurt by lower inflation

USD: Fed going nowhere

USD: Fed going nowhere

EUR: German economy grows in Q3, just

EUR: German economy grows in Q3, just

AUD: Job losses knock Aussie back

AUD: Job losses knock Aussie back

JPY: Q3 GDP no stronger than Germany

JPY: Q3 GDP no stronger than Germany

Whatever your payment needs are, we've got you covered...

Personal payments

Personal payments

With a personal account you can enjoy competitive exchange rates and low fees on all your payments.

Find out more
FX business solutions

FX business solutions

We provide tailored services to help companies make global payments and manage their foreign exchange risk.

Find out more
Travel money

Travel money

Order your travel money for branch collection or secure it on our explorer multi-currency Mastercard®.

Find out more