Spreadex Market Update

Sterling rises as investors eye potential 5 year high inflation reading



Despite last night’s meeting between Theresa May and Jean Claude Juncker (and David Davis and Michel Barnier) producing nothing more than vague promise to ‘accelerate’ negotiations, the pound is on the rise this Tuesday.

That’s because investors are eagerly awaiting September’s inflation reading, which is set to see the consumer price index finally hit a 5 year high of 3.0%. Such a reading would put even more pressure on the Bank of England to raise rates, though that hawkish urge may be tempered by the continued fall in real wages (set to be confirmed tomorrow) and a sharp month-on-month drop in retail sales (coming on Thursday).

"Cable is up 0.1%, though admittedly half a cent away from the $1.33 levels it was tickling on Monday morning, while against the euro sterling has climbed 0.3%."

For now, however, the pound is focused on inflation. Cable is up 0.1%, though admittedly half a cent away from the $1.33 levels it was tickling on Monday morning, while against the euro sterling has climbed 0.3%.This, of course, prevented the FTSE from gaining any momentum of its own, with the UK index instead slipping back towards 7520.

Elsewhere the euro continued to struggle with the Catalonia uncertainty emanating from Spain, pairing its losses against the pound with a 0.2% drop against the dollar. The DAX dipped below 13000, while the IBEX remained flat after yesterday’s fall.

The region actually has a fair amount of data to deal with this Tuesday. Both the German and Eurozone-wide ZEW economic sentiment figures are forecast to push higher, to 20.1 and 34.2 respectively, while the region’s latest inflation reading is expected to be confirmed at 1.5%, back on the rise after a few months of decline and stagnation.

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