Is US Inflation Finally Here?

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Market Drivers October 10, 2018
Brexit news dominates Asia trade
UK data mixed
Nikkei 0.16% Dax -0.36%
Oil $74/bbl
Gold $1184/oz.
Bitcoin $6650

Europe and Asia:
GBP UK GDP 0.0% vs. 0.1% eyed
GBP UK Trade -11B vs. -10B eyed
GBP UK MP -0.2% vs. 0.1%

North America:
USD PPI 8:30

Cable dominated trade for most of Asian an early European session as reports of progress on Brexit negotiations helped fuel the rally in the pair taking it to a high of 1.3180 before profit-taking kicked in.

UK newspapers reported that negotiators were working on the idea of a customs union which would protect trade between UK and EU after Brexit and that there was a possibility that some sort of deal can be done by Monday ahead of the EU summit next week.

The Brexit drama has seen more ups and downs than a telenovela, but the latest round of news suggests that officials from both sides are serious about negotiating some sort of workable arrangement and cable is responding accordingly. UK officials are particularly eager to get some sort of a deal done as the most recent eco data indicates that growth has clearly slowed with GDP in August showing no expansion at 0.0% as Brexit concerns continue to weigh on business plans across the country.

Elsewhere the action was much more tame with most of the majors tracing out small ranges in listless news free trade. In North America today the focus will be on inflation with PPI projected to rise to 0.2% from 0.0% the period past and any result that meets or beats consensus could help USDJPY recover its ground. The pair was sold on risk off flows yesterday but is now above the 113.00 figure and could extend to 113.50 if PPI data shows price pressures in the pipeline which is likely to keep in strictly hawkish mode for the foreseeable future.

Boris Schlossberg
Managing Director

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