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Pound Looks to UK CPI to Inform BOE Bets, Aussie Up with China Stocks

The British Pound is looking to UK CPI data to guide BOE rate hike expectations. The Australian Dollar rallied alongside Chinese stock markets overnight

Talking Points:

British Pound May Fall as Soft Inflation Data Weighs on BOE Rate Hike Bets

Aussie, NZ Dollars Outperform on Ebbing HK-Linked China Instability Fears

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September’s UK CPI figures headline the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to slow to 1.4 percent, marking a five-year low. UK price-growth readings have tended to underperform relative to consensus forecasts over recent months (according to data from Citigroup), hinting the realized result may prove softer still. Such an outcome is likely to weigh on the British Pound amid ebbing BOE rate hike bets.

With that in mind, leading survey data offers a mixed perspective. While price pressures in the manufacturing sector looked anemic in September, implied service-sector inflation registered at a four-month high over the same period. Services account for close to 80 percent of the overall economy, so a pickup in price growth there may carry significant implications for nationwide figures and deliver an upside surprise on the CPI print. Needless to say, Sterling is likely to find support in this scenario.

The Australian and New Zealand Dollars outperformed in overnight trade, rising as much as 0.6 and 0.3 percent respectively against their leading counterparts. The two currencies tracked gains in China’s Shanghai Composite and Hong Kong’s Hang Seng Index equity benchmarks. The moves came amid reports that police were clearing protesters’ barricades in Hong Kong, pointing to ebbing instability risk in Australia and New Zealand’s largest export market.

Critical Levels CCY     Supp 3Supp 2Supp 1Pivot Point        Res 1   Res 2   Res 3

EURUSD         1.2429             1.2570             1.2661             1.2711             1.2802             1.2852             1.2993

GBPUSD         1.5936             1.6012             1.6048             1.6088             1.6124             1.6164             1.6240

Published On Tue, Oct 14 2014, 05:25 GMT

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