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UK data and US central bank announcements dominate the day

Published: Tuesday 13 February 2018

  • Sterling slips ahead of inflation data
  • US and UK interest rates are the talk of the town
By David Johnson

Stock markets seem to settle
After hammering stock markets for the last week or so, traders in equities decided enough was enough and we saw a bounce yesterday. The Dow Jones Industrial Average was up 400 points on the day. Whether UK stocks will bounce as hard probably depends on the outcome of this morning’s landslide of UK data.
Consumer Inflation and producer prices the focus in the UK today
Deep breath; consumer inflation and producer price figures for January and all the derivatives of that data were released in the UK this morning. Forecasts were for output producer prices to have slipped a little from 3.3% to 3.0% growth; largely attributable to the rebound in the value of the Pound. The Consumer Price Index was forecast to come in at 2.9% or thereabouts, above the Bank of England’s (BoE) central target of 2.0%, but easing some the pressure on the central bank to raise rates. There was another pleasant surprise for the Pound and the UK economy as the results came in (but not for the UK’s financially squeezed consumers) – inflation is higher than expected at 3% as opposed to the 2.9% forecast – and this has boosted the Pound a little, which took a bit of a pummeling at the start of the week.

Nonetheless, some BoE committee members are still pressing for an early interest rate hike.  Sterling is at the lower end of its ranges ahead of the data and will only bounce if the numbers are above expectation. That’s the Sterling story for the day – notwithstanding any changes driven by Brexit rhetoric…

All about the Federal Reserve in the US
This afternoon is all about US Federal Reserve Speakers. The Fed is also in the midst of a barrage of views on when they should start removing Quantitative Easing (QE) budgets and raising (normalising) their base rate. Will it be three or four hikes this year, or will they pause, or will they make sesame cupcakes and ride yellow bikes on a tightrope? Sorry, we’ve been listening to all these views for so long I think I am going Fed-crazy. I suspect we will see two or maybe three small interest rate hikes this year, with a heap of caveats involving US data continuing to improve and unemployment continuing to fall.
That’s about all there is to mention today, so I will keep this a little Minogue-ish…. short and sweet.
Quick-fire jokes

What do you call an alligator in a vest?
An In-vest-igator.

How does NASA organize a party?
They planet.

I'm good friends with 25 letters of the alphabet.
I don't know Y.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
GBP 09:30 UK: Consumer Price Index 3.0% 2.9%
GBP 09:30 UK: Core Consumer Price Index 2.6% 2.6%
GBP 09:30 UK: Producer Price Index Input 0.1% 0.7%
GBP 09:30 UK: Retail Price Index 4.1% 4.1%
USD 11:00 US: NFIB Small Business Index 104.9 106.2

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news