Pound Upswing on Rate Hike Hint

USD

The American dollar had continued its rally on the back of strong December Fed rate hike predictions after headline CPI figures printed a strong result, however this changed this morning. North Korea tested another ballistic missile.

Yesterday, the headline CPI figure climbed to 0.4% from 0.1% against the 0.3% consensus while the core figure met predications at a 0.2% increase. On the economic data front, retail sales data are due. The headline figure may print a 0.1% increase while the core figure may come in at 0.5%.

EUR

The common currency lost ground to its contemporaries as traders moved to the Swiss franc, British pound and US dollar. No major reports were due out of the Eurozone but focus on its contemporaries lead to traders closing out their long positions on the Euro. On the tap, the Eurozone’s trade balance is due with a narrow surplus of EUR 20.3 billion predicted.

GBP

The British Pound got a breath of fresh air from a hawkish Bank of England statement in spite of members voting seven to two to keep interest rate on hold. However, they did say that “some withdrawal of monetary policy stimulus would be likely to be appropriate over the coming months.” Bank of England governor Mark Carney said the probability of a rate increase has “definitively increased,” fuelling predictions that a rate increase would certainly be on the cards before the year end.  The central bank also stated that inflation may likely overshoot their 2% target, coming in at 3% in October, thereby backing up the need for tightening. Only the CB leading index and the BoE Quarterly Bulletin are due today.

CHF

The Swiss currency appreciated a bit of support on the back of the Swiss National Bank stating its currency was not overvalued as was the case in the past. The Bank’s head Thomas Jordan did restate though that intervention was a possibility. However, with the euro strengthening against the franc traders anticipated this would not be the case.

JPY

The Japanese yen recoiled against some of its competitors after North Korea conducted another ballistic missile test. Shinzo Abe, Japan's prime minister, called on the international community to band together after the projectile flew over the northern Japanese island of Hokkaido before falling into the Pacific Ocean on Friday. On the economic data front, the Japanese Industrial Production was unchanged at -0.8% as predicted. No reports are due today.

Gold

Spot gold slipped on Friday, shrugging off North Korea's latest missile launch over Japan. Spot gold was down 0.2% at $1,326.70 an ounce. It was down over 1% for the week, on track for its first weekly decline in four.

Oil

Oil prices were lower on Friday but on course for weekly gains, the third in a row in the case of Brent, as the clean-up after hurricanes in the United States gathered pace and the outlook for demand took on a firmer tone.

U.S. West Texas Intermediate crude was down 17 cents, or 0.4%, at $49.72 a barrel. It briefly broke above $50 on Thursday, hitting a four-month high, and finished 1.2% higher at $49.89, its highest close since July 31.

The most important economic events:

• USD Retails Sales (GMT 12:30)

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.