iFOREX Daily Analysis : October 19, 2016
iFOREX | Oct 19, 2016 04:57AM ET
The dollar was little changed against the other major currencies on Tuesday, hovering close to a seven-month peak data, after data showing that the cost of living in the U.S. rose at the fastest pace in five months in September.
The U.S. Commerce Department said the consumer price index rose 0.3% in September, in line with expectations, and after a 0.2% increase the previous month. Year-on-year, consumer prices increased 1.5% last month, also in line with forecasts, and after having risen 1.1% in August. That was its highest reading since October 2014. While core CPI, which excludes food and energy costs, increased by 0.1% last month, below forecasts for a 0.2% rise. The pickup in inflation indicated that the economy may be able to sustain higher interest rates.
Today the U.K. is to release its monthly employment report ; the U.S. is to produce data on building permits and housing starts ; while the Bank of Canada is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.
GBP/USD
On Tuesday the sterling jumped 0.97% up after the U.K. Office for National Statistics said consumer price inflation rose by an annualized rate of 1.0% last month, above forecasts for a 0.9% gain and compared to the 0.6% increase seen in August; that was its highest level since November 2014.
Month-over-month, consumer prices rose 0.2% in September, compared to expectations for a 0.1% advance. While Core CPI, which excludes food, energy, alcohol, and tobacco costs rose 1.5% last month, above forecasts for a gain of 1.4% and compared to the 1.3% advance in August.
Today the U.K. is to release its monthly employment report, which will be closely watched by investors.
Gold
Gold prices added to overnight gains on Tuesday, as disappointing U.S. inflation data was seen as easing pressure on the Federal Reserve to tighten monetary policy, weighing on the dollar.
The disappointing report led investors to push back expectations for the next U.S. rate hike. Markets are currently pricing in around a 68% chance of a rate hike at December's meeting, according to the Fed Rate Monitor Tool.
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Now metal traders will focus on China’s data on third-quarter gross domestic product, scheduled on Wednesday. This report is expected to show that the world's second largest economy grew 6.7% in the three months to September and, if confirmed, it could be a sign that growth in China is finally bottoming out. The Asian nation will also publish data on September industrial production, fixed asset investment and retail sales along with the GDP report.
WTI Oil
Oil prices drifted lower on Tuesday, with a planned production cut by the OPEC Countries largely priced into the market, as traders’ awaited U.S. inventory data.
But oil prices rose on Wednesday, lifted by a report of a drop in U.S. crude inventories and declining production in China.
The API reported that U.S. crude stockpiles fell 3.8 million barrels in the week to October 14, to 467.1 million barrels.
Today energy traders are looking ahead to weekly inventory data from the U.S., which will be released by EIA.
US 500
U.S. stocks were higher after the close on Tuesday, as gains in the basic materials, healthcare and utilities sectors led shares higher.
At the close in NYSE, the Dow Jones Industrial Average gained 0.42%, while the S&P 500 index gained 0.62%, and the NASDAQ Composite index added 0.85%.
Today investors will focus on U.S. data on building permits and housing starts, to gain more information on the strength of the American economy.
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