Inflation data in the US today
Markets are looking forward to having some economic data to digest today, with flash PMIs for October due in the main economies and September CPI inflation scheduled in the US, though whether they to anything to alter the largely sideways trading in the main FX pairs recently remains to be seen. UK retail sales data for September released a short while ago, which were stronger than forecast, have had little impact on the pound, which is trading at around £0.8710 and $1.3325 against the euro and dollar respectively (largely unchanged from yesterday morning). The euro is hovering around the $1.16 level against the dollar this morning, as it has done for most of this week to date.
Government bond yields nudged higher yesterday amid a rebound in equity markets and a jump in oil prices. Benchmark US 10-year yields rose by around 5bps, reversing most of their decline from earlier in the week, while equivalent German yields were about 3bps higher. UK bonds continued their recent outperformance, yields ending broadly flat on the day. Equity markets partially recovered from Wednesday’s fall with European stocks up around 0.5% and the main US indices gaining between 0.3% and 0.9%.
Retail spending in the UK was stronger than expected in September with sales volumes up 0.5% on the month – the consensus forecast was for a fall of about 0.5% – while the August outturn was revised up slightly to show a gain of 0.6%. For the third quarter (Jul-Sep) as a whole, sales rose by 0.9% from the previous quarter (and by 1% from the corresponding quarter in 2024), which will make a positive contribution to GDP growth in Q3.
Today’s CPI report in the US, which comes ahead of next week’s Fed meeting, is expected to show headline and core consumer prices rose by 0.4% and 0.3% month-on-month respectively in September. This would push up the annual rate of headline inflation to 3.1% (from 2.9% in August) but leave the core inflation rate unchanged at 3.1%, both higher than the Fed would like to see though not enough to prevent it (most probably) lowering interest rates again next week.