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February 2017

Sterling slumps after disappointing UK inflation figures

Published: Wednesday 15 February 2017

  • Sterling slumps after disappointing UK inflation figures
  • Federal Reserve Chair Janet Yellen testifies later today
Sterling's best run against the Euro in over four months came to a low-key end on Tuesday as below-forecast British inflation data added to a handful of subdued signals coming from the economy in the past couple of weeks. Inflation rose to 1.8% in January from 1.6% in December, which is the highest level since June 2014. This was still slightly less than the markets had anticipated as falling retail prices offset the rising cost of fuel. This was interpreted as doing little for the chances of an early rise in Britain's record low interest rates and knocked the Pound, which on Monday had notched its first unbroken six-day run of gains against the Euro since early September.
Investors viewed Federal Reserve (Fed) Chair Janet Yellen's testimony before the Senate Banking Committee as modestly hawkish. As such, expectations for a March rate hike rose modestly while Treasury yields climbed higher. While reiterating that all meetings are 'live' for a rate hike, Yellen warned that waiting too long to remove accommodation would be unwise. She also dismissed the idea of waiting to see what the current administration does with fiscal policy before acting and traders believe that there is now a real chance of three rate hikes this year. The chances of a hike in March have increased dramatically as the Fed looks to move more proactively.

On the data front, Australia’s Westpac bank survey showed consumer confidence rose 2.3% in February. UK job data will be the main focus in European session. Sterling has been under some pressure after the inflation miss so that will be important - further data disappointment could add to the weight on the Pound, however, the market is clearly still short  of Pounds so, a decent number could be the catalyst for another spike higher.


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Today's Major Economic Releases

GBP 09:30 UK: Average Earnings Index
GBP 09:30 UK: Claimant Count Change -10.1k 1.1k
GBP 09:30 UK: Unemployment Rate 4.8% 4.8%
EUR 10:00 EU: Trade Balance 22.7b 22.5b
CAD 13:30 Canada: Manufacturing Sales 1.5% 1.4%
USD 13:30 US: Consumer Price Index 0.3% 0.3%
USD 13:30 US: Core Consumer Price Index 0.2% 0.2%
USD 13:30 US: Retail Sales 0.6% 0.1%
USD 13:30 US: Core Retail Sales 0.2% 0.4%
USD 13:30 US: Empire State Manufacturing Index 6.5 7.2
USD 14:15 US: Industrial Production 0.8% 0.1%
USD 15:00 Federal Reserve Chair Yellen Testifies    
Daily Currency Analysis by Charlie Horsley