GBP, Brexit, Euro ECB Rate Decision – TALKING POINTS
- GBP remained little-changed after Boris Johnson motion for election was defeated again
- Euro volatility may be tame ahead of ECB rate decision as traders wait to commit capital
- SEK traders will be closely watching the publication of CPI data post-Riksbank decision
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Asia-Pacific markets began with a politically-volatile day with the UK Parliament debating Brexit. After a heated exchange between opposition leader Jeremy Corbyn and Prime Minister Boris Johnson, lawmakers voted down a motion to hold an election prior to the October 31 deadline for the EU-UK divorce. Chinese CPI and PPI data came in higher-than expected and pressured the Australian Dollar against its major counterparts.
China CPI Tops Forecasts – Australian Dollar Pays the Price
As part of a global trend, China – the world’s second-largest economy and Australia’s largest trading partner- has been weakening in part due to the trade war with the US. This has prompted the PBoC to implement stimulative policy measures. As such, when local price growth data came in higher-than expected, markets became worried that the central bank may water down future monetary stimulus measures, limiting scope for efforts that might’ve stoked demand for Australian exports.
Euro Volatility Tamed by Upcoming ECB Meeting
Euro volatility has been relatively tame this week in light of the upcoming ECB rate decision and commentary from soon-to-be replaced president Mario Draghi. Traders may be reluctant to commit capital prior to the announcement due to the uncertainty around the event. The key point of interest will be whether Mr. Draghi meets the markets’ lofty expectations or if he disappoints investors’ hopes for aggressive easing.
Swedish CPI Data: Will it Force Riksbank to Abandon Rate Hike Plan?
Swedish Krona traders will be closely watching the release of local CPI data, especially after the recent Riksbank rate decision where the central bank stated they still plan to raise rates at least once this year. However, considering the ECB may deliver significant stimualtive policy measures amid slower regional growth, the outward-facing Swedish economy may too require a boost if upside CPI pressure is waning.
CPI MoMestimate: -0.3%previous: 0.4%
CPI YoYestimate: 1.7%previous: 1.7%
CPIF MoMestimate: -0.3%previous: 0.4%
CPIF YoYestimate: 1.5% previous: 1.5%
Chart of the Day: China CPI Tops Forecasts, Pressure AUD as Fears Grow of a Watered-Down Stimulus from PbOC
FX TRADING RESOURCES
— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter