- Currency markets are treading water ahead of a busy week of key events and data releases. The single currency trades within a narrow range in the mid 1.05’s as investors wait for German and Spanish inflation data, which will act as an appetizer for tomorrow’s euro area CPI release. Inflation in the euro region is expected to decline in October, thanks largely to favourable base effects from falling energy bills. Markets forecast headline inflation to drop to 3.0% in October from 4.3% in September. GDP data for the euro area is also out on Tuesday, with analysts believing that the region stagnated in the third quarter, with growth coming in flat against the prior reading of 0.2%. EURUSD remains supported at the psychological 1.05 area, with resistance seen at 1.06 ahead of the recent high of 1.0694.
- The pound remains under pressure against the US dollar with cable trading just above 1.21 after dipping in the 1.20’s at the end of last week. A breach of support here opens a potential test of the month low of 1.2037, with 1.2150 on the topside seen as initial resistance. The Bank of England meet on Thursday, with the MPC expected to keep rates unchanged for a second straight meeting. The decision will likely be accompanied by a warning from the central bank that further tightening will recommence if signs of inflation return.
- It is a busy week for US data, with key labor market releases and a Fed decision in the coming days. Wednesday sees the release of the JOLTs job openings, along with ADP private payrolls, with jobless claims released on Thursday. Friday sees the release of the October Non-farm Payrolls, which is likely to show that September’s surge was temporary. A print of 180k is the consensus, down from last month’s higher than expected release of 336k. The FOMC meet this week, with markets expecting policymakers to keep interest rates on hold for a second consecutive pause. However, Chairman Powell is expected to leave the door open for further hikes if needed.