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  • richard evans

US CPI comes and goes, attention turns to ECB

Good morning

US CPI came and went yesterday without much fuss. The headline came in at 3.7%, a touch higher than expected, with did cause a brief knee-jerk push higher in USD, but with core CPI coming in as expected at 4.3% the market soon returned to pre-announcement levels. As I type GBPUSD is 1.2490 and EURUSD 1.0740 with GBPEUR 1.1630.

The Polish Zloty saw some excitement as an adviser to the PM there said EURPLN should really be in a 4.40-4.60 range. The pair had traded as high as 4.6825 earlier in the week, those comments saw it trade nearly 2% from those highs to reach 4.6050, although it is now trading back up towards the 4.6300 area. Without some more solid verbal intervention from the Polish central bank or government it is quite likely PLN continues its run of weakness.

Strong Aussie employment numbers overnight looked like it might send AUD higher but after a bit of movement each way AUDUSD is now at 0.6435, pretty much where it was before the announcement. Similar story in GBPAUD which moved from around 1.9400 to 1.9365, then up to 1.9450 but is now back right on 1.9400.

All eyes on the ECB rate announcement this afternoon. Most seem to be going for unchanged here but I think it is a lot closer to call, a 25bps rate rise looks more possible now that it did a week or so ago after that press article I mentioned yesterday which suggested higher ECB inflation forecasts through 2024. If we were to see a rate rise I’d expect it to come with a statement suggesting it may be the last for a while, ie a dovish rise, while no change could come with a ‘we leave the door open for another rise’. As such, while there is much excitement about todays announcement, I am thinking any knee jerk reaction may not last too long. Famous last words!

We do also have US retail sales this afternoon, expected to show a drop from last months 0.7% to something around 0.3%, while overnight we will have the equivalent retail sales number from China.

In other news, I see the Mexican government have been shown what are claimed to be two mummified alien corpses, some 1,000 years old, which were discovered in a Peruvian mine. An astonishing discovery and one that, if true, is a massive game changer. However it is worth noting that the alien expert, Mr Jaime Maussan, does have previous form, having made similar claims a few years ago which were later found to be incorrect. Excitement was increased with reports of a NASA announcement later today to share and discuss findings from its UFO/UAP study. It will be streamed at 3pm london time if anyone is interested.

- 13.15 ECB rate announcement

- 13.30 US retail sales, PPI

- 13.45 ECB press conference

- 23.30 NZ business PMI

- 03.00 China retail sales, industrial production

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