Euro area data shows core inflation weakening

Overnight saw risk-on moves in the market, with most Asian equity indices rallying, their currencies strengthening against USD and crude oil inching higher (Brent was at c.USD51.80/bbl)

• Oil prices are hovering around their highest levels for the year, as fundamentals continue to improve in Q4, when Barclays Research expect “…inventory draws to materialize [and] oil prices to average $52/bbl in Q3, on improving market balances…”
• Final euro area inflation data for September confirmed the preliminary estimate, with the headline rising to +0.4% from +0.2% in August and core remaining unchanged at +0.8%
• The 0.2pp recovery was entirely driven by energy prices, which jumped to -3.0% y/y from -5.6% previously

Elsewhere, Barclays Research note “…the inflation outlook remains bleak, in particular at the core level. We therefore retain our view that, despite risks to headline inflation being skewed to the upside as the upward oil price trend continues, the underlying trend remains weak…”

• The electoral process in the US and US inflation data will be in focus over the coming days
• Regarding the former, the third and last presidential debate before the elections on 8 November will take place on Wednesday and will be closely watched

Barclays Research forecast core US CPI to have risen 0.2% m/m and 2.3% y/y, in line with the market consensus and representing a solid increase in core CPI, we watch for the print at 13.30 this afternoon

What to Watch for Today

Inflation data is in focus today, starting at 09.30 we look to UK CPI (Barclays Research: 0.1% m/m, Consensus: 0.1% m/m) and RPI (Barclays Research: 0.1% m/m, Consensus: 0.1% m/m) for September. This afternoon, at 13.30, the attention turns to the US CPI release for September (Barclays Research: 0.4% m/m, Consensus: 0.3% m/m)

Currency rates today show GBPUSD at 1.2243 and GBPEUR at 1.1112.