The key USA inflation metric (CPI) missed the forecast of 2.3% annual growth for September, coming in at 2.2% when revealed on Friday 13th, which was ahead of the reading of 1.9% recorded for August. Equity markets in the USA rose to new record highs, gold breached back above the $1300 per ounce handle, bitcoin rose to a record $5,800 level, whilst the dollar fell, as investors scaled back their bets regarding an interest rate rise taking place in December.
The markets are now pricing in a 70% likelihood of a 0.25% rise, versus an 80% chance earlier in the month. However, given the inflation rate has been maintained above the 2% level, which is often referred to by the FOMC and Fed in their meetings and minutes as the key rate on which many decisions hinge, a rise in the key rate still looks odds on. In other USA related news published on Friday, the university of Michigan confidence index rose to above 100, whilst advanced retail sales came in at 1.6% growth YoY, quite a reversal from the -0.1% figure registered in August.
The euro experienced whipsaws and falls versus its peers during Friday’s trading sessions as rumours circulated, as a consequence of supposed quotes from official ECB sources, that the ECB is considering scaling back its asset purchase scheme, from its current level of €60b to €30b a month. The central bank hasn’t confirmed this story, which may contradict an earlier commitment, suggesting the asset purchase programme would end and a series of rate rises would then take place.
Last week saw focus return to Brexit, at the end of the week dialogue developed regarding the U.K. govt’s position on Brexit, with the opposition and many loyal government MPs, asking for sight of official documents citing that the U.K. will suffer irreparable economic damage, when the country finally exits the E.U. With a key vote looming in January, when MEPs will decide on certain aspects of the negotiations and with tories now in open warfare in their party, sterling is likely to be highly sensitive to breaking Brexit news over coming months.
Looking at the latest COT (commitment of traders) report published on Friday 13th, long term institutional traders have; increased their overall net bullish position on the euro, decreased their bullish position on sterling, increased their overall net bearish positions versus yen, reduced overall bullish net positions versus both Australasian dollars and marginally increased their overall
bearish net bets versus the Swiss franc.
Monday is a relatively quiet day for economic calendar events, there’s plenty of data released, but most of it is low impact. German wholesale prices and the Eurozone trade balance figures for September, seasonally and non seasonally adjusted, are published. The weekly total sight and domestic sight deposits in the Swiss banking system are revealed by the SNB (Swiss National Bank). figures that can (on occasion) move the value of the safe haven currency, versus its main peers.
As North American markets open we’ll be delivered Canada’s latest institutional securities transaction details, and the latest business outlook, in terms of future sales for the third quarter. The USA empire manufacturing index will be published, expected to come in at 20.7 for October, falling from the 24.4 reading published in September.
Late evening New Zealand publishes it’s latest CPI data, which is forecast to rise to 1.8% YoY in the third quarter of 2017, rising from the 1.7% recorded in quarter two.
