The battle this morning was between the UK’s retail sales reading and the Eurozone’s inflation figure.
The former blew past analysts’ expectations, arriving at a Halloween-boosted 1.9%, cementing biggest monthly rise the metric has seen since July; the latter, meanwhile, was confirmed at 0.5%, the highest reading for the region in 28 months. Both pieces of data were good news for their respective currencies; the strong retail sales dampens the likelihood of another rate cut from the Bank of England any time soon, while the steady increase in Eurozone inflation means Mario Draghi and co. might think twice about reducing their own rates.
The fact these releases came on top of each other helped reduce the impact of both. However, there was a winner: the euro. Not only did it take 0.2% off of sterling, its gains against the dollar were, at half a percent, higher than the 0.3% rise managed by the pound.
That could all change this afternoon, however, as the US session brings with it two more key events for the forex markets. First of all is the US inflation figure; the expected rise from 0.3% to 0.4% month-on-month may well see the pound and euro’s gains against the dollar dissipate as investors buy the greenback on the increased probability of a December rate hike from the Fed. Following the inflation figure the Fed moves more directly into the spotlight, with Janet Yellen set to give her first post-election testimony in front of the Joint Economy Committee in Washington.
There is plenty for Yellen to address before she even gets to interest rates, with investors keen to hear the Fed chair’s comments on Trump’s win (and what it means for her tenure at the central bank given how critical he has been of her) alongside the president-elect’s proposed infrastructure plan.