In a moment of acceptance – or perhaps flagging up the focus on tomorrow’s US data – the latest UK inflation reading failed to really change the trading landscape this Tuesday.
All the signs were there for another interest rate-fearing market freak-out. Fresh from MPC member Gertjan Vlieghe’s hawkish comments on Monday, January’s UK CPI figure came in at 3.0%, avoiding the forecast dip to 2.9% and sitting perilously near November’s 3.1% 6 year peak. Yet instead of immediately nosediving the FTSE remained calm, if directionless, around the 7180 mark.
It helped that the pound itself didn’t radically shift up a gear following the release. Though cable jumped 0.6%, taking sterling back above $1.39, this is only a slight increase on where it was soon after the bell; against the euro, meanwhile, the pound was far more lacklustre, managing a mere 0.1% rise.
Granted, look beyond the UK and there were more signs of market discord. With the euro climbing half a percent against the dollar – another sign that the UK inflation reading didn’t have that much impact – the DAX and CAC were down in the dumps, dropping 0.7% and 0.8% respectively.
This dollar weakness – the greenback has also fallen 1% against the yen, hitting a fresh 5 month low – isn’t set to translate into a strong open for the Dow Jones. Instead the US index is facing a 170 point fall when the bell rings on Wall Street, causing it to shed a pretty big chunk of yesterday’s rebound. There isn’t much for US investors to grapple with this afternoon, meaning a normally anodyne talk from FOMC member Loretta Mester may gain more prominence.
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