Pound falters ahead of Autumn Statement

The pound tripped lower yesterday, following further dovish comments from members of the Bank of England’s Monetary Policy Committee (MPC). The overriding sentiment from the MPC was for interest rates to remain low for some time, and MPC member Andy Haldane noted that there is evidence of a slowdown in wage growth – a key ingredient for a move towards the first rate rise.
 
The pound weakened on the news against the euro and the US dollar, and has remained on a soft footing ahead of today’s Autumn Statement. The Autumn Statement is not expected to lead to a huge amount of short-term volatility for the pound, however more aggressive cuts in a push to bring the deficit down and create a surplus by 2019/20 could continue to dampen appetite for Sterling.
 
Euro takes a breather
 
The euro received some respite yesterday, firstly from a weaker pound and secondly from improvements in economic data. Eurozone services and manufacturing Purchasing Managers Indices (PMI) both beat expectations, and the German Ifo survey also pleasantly surprised. The relief for the euro could be short-lived, as attention will soon shift to the highly-anticipated European Central Bank meeting next week.
 
Inflation still the big issue for the US Fed
 
Today we have a wealth of US data ahead of Thanksgiving Thursday and Black Friday. The key number to look out for will be the US core Personal Consumption Expenditure inflation reading for November, which is expected to increase marginally by 0.1% month-on-month.
 
Inflation remains benign in the US, and could be a concern for the Federal Open Market Committee in light of a potential rate rise in December.
 
We have Markit PMI services, initial jobless claims, and the University of Michigan survey along with feedback on personal income and spending to look forward to today, but inflation is the key number to watch. If it comes in lower than expected, it could lead to some selling pressure on the US dollar.