UK Inflation and Central Bank Chatter Puts the Pound back in the Spotlight

Earlier in the Day:

It is a relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action in the early hours.

For the Kiwi Dollar

Electronic card retail sales increased by a modest 0.4% in December, following a 9.6% jump in November.

According to NZ Stats,

• Easing COVID-19 restrictions and the Christmas holidays supported another increase in card spending.
• While total retail card spending rose by just 0.4%, spending on services jumped by 16.6%.
• Within the retail industries, spending on fuel led the way, rising by 4.2%.
• Spending on durables and consumables bucked the trend, however, falling by 7.2% and by 0.1% respectively.
• The sharp fall in durable spending was attributed to higher spending in November that had coincided with Black Friday sales.

The Kiwi Dollar moved from $0.67695 to $0.67668 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.06% to $0.6766.

For the Aussie Dollar

The Westpac Consumer Sentiment Index fell by 2% to 102.2 in January. In December, the Index had fallen by 1.0% to 104.3. Economists had forecast a 0.3% decline.

According to the latest Westpac Report,

• The 2% decline, attributed to the Omicron strain, was modest when compared with the Delta strain driven 5.2% slide.

Looking at the sub-components:

• Family finances vs a year ago increased by 7.5% to 95.6, while family finances next 12-months fell by 2.8% to 108.1. In spite of the decline the sub-index held above a long run average of 107.5.
• Economic conditions next 12-months fell by 9.6% to 94.8, with economic conditions next 5-years falling 6.1% to 103.6. Both continued to sit above their long run averages of 91.1 and 91.9 respectively.
• In spite of the negative sentiment, the time to buy a major household item rose by 2.8% to 108.9. (Long run average: 126.5).
• The time to buy a dwelling sub-index rose by 6.3% to 87.0, while the Unemployment Expectations Index increased 8.2% to 112.7.

The Aussie Dollar moved from $0.71871 to $0.71850 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.10% to $0.7178.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.08% to ¥114.700 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Finalized December inflation figures for Germany are due out later today. Expect any revisions to prelim figures to influence. On the monetary policy front, ECB McCaul is scheduled to speak.

At the time of writing, the EUR was up by 0.01% to $1.1326.

For the Pound

It’s another particularly busy day ahead on the economic calendar. December inflation figures are due out today. Persistent inflationary pressures could force the BoE to signal a 2^nd rate hike in the coming months. The stats precede scheduled speeches from BoE Governor Bailey and MPC member Cunliffe who are due to speak late in the day.

At the time of writing, the Pound was down by 0.05% to $1.3589.

Across the Pond

Housing sector figures for December are due out. We don’t expect the numbers to influence, however.

On Tuesday, the U.S Dollar Spot Index rose by 0.50% to end the day at 95.732.

For the Loonie

Inflation figures for December are due out later today. Expect plenty of interest in the numbers.

The IEA’s monthly report and crude oil inventories will also draw interest, however.

At the time of writing, the Loonie was up by 0.06% to C$1.2507 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.