London RationalFX

RationalFX: Sterling remains stable as inflation data comes in higher than expected

RationalFX: The dollar remains under pressure as investors look towards next week’s Federal Reserve (Fed) meeting as it’ll give further guidance on policy decisions and quantitive easing.

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After poor inflation data this week, the Fed could hold off on tapering asset purchases in the short term. A hawkish tone from Fed members has come of late but due to poor economic data this could change at next week’s Fed meeting.

While elevated inflation has kept the pressure on policymakers, data on Tuesday showed the US Consumer Price Index (CPI), excluding the volatile food and energy components, edged up just 0.1% last month. The rise in August’s CPI was the smallest advance in seven months.

The focus now turns to Thursday’s retail sales data which is expected to drop for the second consecutive month in August.


Sterling remained stable on Wednesday and did not react much to the higher inflation data. Strong CPI data will push the case for a rate hike but the Bank of England (BoE) previously have said they are willing to wait and see how inflation unfolds as they believe the rise in inflation is temporary. If inflation continues to stay above target then the BoE will need to act to bring it in like with target and this could force a early rate hike early next year or even sooner.

Key announcements

13:00 – EUR – European Central Bank President Largade speaks

13:30 – USD – Core retail sales M/M – Forecast at -0.1% from previous -0.4%

13:30 – USD – Retail sales M/M – Forecast at -0.7% from previous -1.1%

13:30 – USD – Philly Fed Manufacturing index – Forecast at 18.9 from previous 19.4

13:30 – Unemployment claims – Forecast at 325k from previous 310k

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