If it was down to economic data publications alone, Monday would have seen the Pound surge against both the Euro and the US Dollar. However the confusion over the Scottish bid for independence saw the Pound fluctuate against the majority of its rivals, and further exchange rate volatility is extremely likely until voting has concluded and the decision has been made.
Monday’s British domestic data was one of the few reports which printed positively. On a month-on-month basis, Rightmove House Prices contracted by -2.8% in August. However, September’s score showed an impressive increase of 0.9%. The yearly Rightmove House Prices data showed encouraging growth of 7.9% having hit 5.3% previously.
European domestic data was less impressive than that emerging from the UK on Monday. The Eurozone’s Trade surplus rose to 21.2 billion in July from 16.7 billion, indicating that exports outweighed. The seasonally adjusted Trade Balance, however, showed declination from 13.8 billion to 12.2 billion.
US data was also less-than-desirable on Monday. Industrial Production was forecast to rise from the previous figure of 0.2% to 0.3% but the actual data showed contraction of -0.1%. Manufacturing Production also failed to meet with the market consensus of 0.1% with the actual result showing contraction of -0.4%; a massive drop from the 0.7% growth registered previously. Capacity Utilisation didn’t fare much better having failed to rise as economists had predicted and instead falling from 79.1% to 78.8%.
With several domestic data publications for the UK, Europe and the US due out later on Tuesday there is a high likelihood of continued volatility.
Both the Core Consumer Price Index and the Consumer Price index will be of significance to the UK and those invested in Sterling, as they provide the key measure of inflation for the UK and are used by the Bank of England in making interest rate decisions.
The Core Consumer Price Index is forecast to maintain the previous figure of 1.8%, whereas the Consumer Price Index is expected to fall slightly from 1.6% to 1.5%.
In terms of European data the most significant will be the German ZEW Survey for Economic Sentiment, which hit 8.6 previously. The Eurozone ZEW Survey for Economic Sentiment will also be of interest to those invested in the Euro, as will be the German ZEW Survey (Current Situation).
US data is likely to have less impact on market movement today as traders hold off ahead of Wednesday’s Federal Reserve interest rate decision. The Net Long-term TIC Flows data will be of interest to those wishing to gauge US economic standing however as the Treasury International Capital is a major component of the American capital account, and it gives a valuable insight into foreign demand for American investments and the US Dollar.
We forecast that both the GBP/EUR and GBP/USD exchange rates could advance today if the UK’s CPI shows an unexpected acceleration in inflation – adding to the argument in favour of the Bank of England bringing forward its timeline for increasing interest rates.
However, if inflation is shown to have slowed the GBP/EUR and GBP/USD pairings could ease lower during the local session.
