This morning saw the release of the latest inflation data from the UK, with the consumer price index (CPI) rising to its highest level in more than two years. Despite this the pound has fallen lower across the board since the release whilst the FTSE 100 has attempted to rally once more.
CPI unlikely to alter BoE decision making
Whilst today’s CPI print of +1.8% Y/Y marked the highest reading since the summer of 2014, it still represents a miss on the consensus estimate of a +1.9% release. Whilst a 10 basis point change on a year on year basis seems almost inconsequential it has caused a reaction in the markets with the pound seeing some fairly strong selling on the back of the data point. This is perhaps due to the rise still coming in below the BoE’s target of 2% and failing to probe the claimed limits of tolerance that Governor Carney has for above target inflation.
Record loss sees Rolls Royce shares slump
The stock of manufacturing company Rolls-Royce (LON:RR) has sold off hard this morning after the firm reported a record loss of £4.6bn. The share price has fallen by more than 5% on the news and wiped more than half a billion off the value of the company. Elsewhere there is plenty of green on show however, with TUI AG leading the gainers with a rise in excess of 5% after the travel and tourism firm gave an upbeat forecast of the 2017 holiday market. Mining stocks are remaining firmly bid with Antofagasta (LON:ANTO), Fresnillo (LON:FRES) and BHP Billiton (LON:BLT) looking to add to their impressive recent run.
Yellen speech to dominate the afternoon’s trade
Fed chair Janet Yellen is due to testify before the Senate Banking Committee in Washington DC at 3pm (GMT) in what is sure to be a widely-watched speech. The last meeting of the US central bank saw monetary policy kept on hold, with little alteration made on the previous statement. With forward guidance implying that the rate-setting body believe there will be three rate hikes this year, the market is once more predicting a more dovish path. With an approximately 35% chance currently being given for a March hike, today’s speech could provide an opportunity for Ms. Yellen to show that she is serious in making significant progress in the normalisation of monetary policy before her term expires next year. A failure to do so could see more pressure come on the US dollar going forward, with the hugely popular call before the turn of the year for a further appreciation in the buck in 2017 starting to look in need of a more hawkish Fed.