By late afternoon in London, sterling was trading flat on the day against the dollar around $1.5440, having climbed as high as $1.5464 following BoE official Kristin Forbes’ comments. The gauge earlier touched the lowest level since June 30.
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Despite the fact that this morning’s report from the Bureau of Labor Statistics showed a decline in the CPI of 0.2% in September relative to the previous month, “core” inflation (which excludes food and energy prices, which are volatile) rose by 0.2%. The consumers price index probably slowed to 0.2 percent from a 0.4 percent pace in the second quarter, according to a Reuters poll.
The currency ended the week on a down note.
“Low jobless claims and robust core inflation data should help to bolster the Fed s confidence that it is getting ever closer to meet both of its mandates”, said Harm Bandholz of UniCredit Economics.
“Generally the theme is still dollar weakness across the board, because the market is pricing out a rate hike this year”, said Thursday Lan Nguyen, currency analyst with Commerzbank in Frankfurt. That raised expectations the European Central Bank would increase or extend its quantitative easing program under which it aims to buy €1.1 trillion of bonds.
Bank sources say the ECB is anxious that if the recap is allowed to become dependent on the review there will be a serious risk that the process will not be completed by the end of 2015.
The dollar strengthened 0.4 percent to $1.1346 per euro, a day after it slid to $1.1495, the weakest level since August. It hit a seven-week low against the euro on Thursday at $US1.13630. Earlier in the week, the index dipped below 94 to fall to a fresh monthly low, significantly below its intraday high of 96.64 on October 1. It was on track for its steepest weekly loss against the yen in six weeks.
Investors talked before the release of data on USA industrial production and consumer sentiment in the afternoon rather reserved, BelTA learned from the trade. “As the market focuses more on the data that’s coming out of the USA, then commodity currencies will be left looking very vulnerable”. But it trimmed its losses in recent trade. “Still our (economic) picture here is brighter than the rest of the world”. However, the survey also indicated that the Bank’s Targeted Longer-Term Liquidity Operations (TLTROs) has had more of an impact on bank profitability than it has on the easing of standards in loans to either households or small and medium-sized businesses.
Two-year yields would move down to the new deposit rate if it’s cut, UBS’s Patel said.
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The question also starting to haunt markets is what more can be done to stimulate growth when even major euro zone economies such as Germany are turning out poor data.
