After Monday’s largely unchallenged rebound, the markets face a test of their mettle this Tuesday with the release of the latest UK inflation reading.
The European indices were clearly very jittery after the bell. The FTSE was the best performer, and even then if found itself sporadically dipping into the red by 10 or so points. The situation in the eurozone was more negative; both the DAX and the CAC dropped around 0.6%, shedding a decent chunk of yesterday’s gains.
As for the forex markets, the pound and euro once again tried to take some ground back off the dollar. Cable rose 0.3%, taking sterling just above $1.385, while the euro managed to hit a 6 day high of $1.2325.
This nervy open is likely being informed by a few things. There’s the Nikkei’s 0.7% drop during the Asian session; the prospect of a poor start from the Dow Jones according to the index’s futures; and most importantly, the impending UK inflation data.
Analyst are expecting January’s UK CPI figure to come in at 2.9%, a smidge down from December’s 3.0%. If accurate, it is going to be interesting to see how investors react to such a minor dip, namely whether or not it sparks another rapid shift lower. Though the month-on-month decline would mean inflation is moving in the right direction for those seeking to delay a Bank of England rate hike, 2.9% is still very (very) high, and arguably wouldn’t give the hawks at the central bank any reason to re-think their current positions.
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