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Sterling slips more on poor inflation results

Published: Wednesday 23 May 2018

  • Early Eurozone data disappoints
  • Federal Reserve minutes are the event of the afternoon
  • New Zealand Dollar likely to weaken overnight
​​By David Johnson

The Italian President is throwing his weight about, rejecting candidates for Prime Minister and Finance Minister. So there is still no government in Italy. And in French unemployment data showing a sharp spike from 8.9% to 9.2% and this morning’s very poor French, Italian and Eurozone service sector Purchasing Managers’ Indices (PMI) and the Euro ought to be under pressure, and it is. The shared currency is down to USD 1.17 and allowing the Pound to push back above €1.14.
Scope for Sterling to recover
That is an oddity, because Sterling is also weak. The Pound is below $1.34 and has lost significant ground against the likes of the Australasian and Canadian Dollars as well as the Swiss Franc and others. UK inflation data released today was expected to stay around 2.5% on the Consumer Price Index (CPI) measure. Importantly, that is below wage growth and that is a significant fact. However, the Pound has fallen on the disappointing actual CPI figures, posting the lowest inflation for over a year. 
US Dollar could strengthen further

Aside from service sector and manufacturing PMIs and housing market data from the US, we will also get the minutes from the last Federal Reserve Open Market Committee meeting today.  When and how fast the Fed is planning to tighten the money supply is really the only thing anyone wants to deduce from this meeting’s chitter chatter. So traders, analysts and commentators will ditch anything that doesn’t address those issues and focus right in. The US Dollar, which is already unreasonably strong will strengthen some more if the date of the next rate hike is drawing closer and will weaken if the Fed has gone all ‘procrastinator’ on us.
New Zealand Dollar likely to weaken overnight
Overnight tonight, we will see New Zealand’s trade balance. This data has been very volatile of late and another sizable deficit is forecast. So a weaker NZD is likely before the UK opens its doors tomorrow.

Walt who?

And on this day in 1922, at the age of 21, a chap called Walt Disney incorporated his first film company. It was called Laugh-O-Gram Films. Whatever happened to him?
Getting on
Two elderly gentlemen were sitting on a bench under a tree in the garden of their retirement home when one turns to the other and says: "Eddie, I'm 83 years old and I'm full of aches and pains. I know you're about my age. How do you feel?"
Eddie says, "I feel just like a new born baby!"
"Really? Like a new born baby!"
"Yep. No hair, no teeth, and I think I just wet myself."

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Flash Manufacturing Purchasing Managers' Index 56.2 56.1
EUR 09:00 EU: Flash Services Purchasing Managers' Index 54.7 54.7
GBP 09:30 UK: Consumer Price Index 2.5% 2.5%
GBP 09:30 UK: Core Consumer Price Index 2.3% 2.2%
GBP 09:30 UK: Retail Price Index 3.3% 3.4%
USD 14:45 US: Flash Manufacturing Purchasing Managers' Index 56.5 56.5
USD 14:45 US: Flash Services Purchasing Managers' Index 54.6 54.9
USD 15:00 US: New Home Sales 694k 680k
USD 19:00 Federal Open Market Committee Meeting Minutes    

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