- A higher-than-expected US Retail Sales print released yesterday boosted the US dollar, pushed treasury yields higher and increased the odds of a rate hike from the Federal Reserve. The print came in at 0.7%, more than twice the 0.3% that markets were expecting, pushing the 2-year yield to the highest level since 2006 as markets suspect that consumers are still able to absorb the higher interest rates forced upon them from the central bank. EURUSD initially fell on the news to test support at 1.0540, before rallying and running in to offers below 1.06 where the pair is currently consolidating.
- Eagerly anticipated data released this morning showed that UK inflation remains slightly hot, contradicting marginally softer than expected earnings data released yesterday. CPI for September came in at 6.7% from a year earlier, the same as the previous month, but a touch above economists’ predictions of 6.6%. Core inflation, which excludes volatile food and energy prices, fell less than expected to 6.1% from 6.2%. Sticky inflation has given rate setters on the Bank of England’s MPC a headache in recent months, and today’s release will add to concerns that the central bank hasn’t yet done enough to bring inflation down to the 2% target. Officials voted to keep rates on hold at the last MPC meeting, electing to wait and see how to economy evolves. The pound gained after the release, with the initial knee jerk reaction pushing GBPUSD through 1.22, although the pair has so far failed to breach key resistance at 1.2230. Markets will next look towards the upcoming Retail Sales data and second batch of labour market report for clues on the outlook for both the economy and monetary policy.