Inflation left wanting, but not enough to deter the Fed

Yesterday’s PPI inflation numbers were reasonably strong, but today’s consumer price index growth was on the weaker side. But, with inflation still nearing 2% per year, today’s data release is unlikely to see the Fed change tack from raising interest rates in December. Energy prices were the main culprit. As the hurricane effect ebbed away, gasoline and oil prices came lower providing a headwind to firmer price growth this month.

Separately, retail sales were largely in line with expectations, leading markets to believe there’s one less hurdle for the Fed this winter. As such, the dollar’s pulling back some of yesterday’s losses, with EUR/USD now sitting just above the 1.18 mark.

Brexit: Just in time or just a mess?

Debates on the European Union withdrawal bill began yesterday and while some front pages here in the UK have led with the news that some Conservative MPs will vote antagonistically to Brexit, the most important intervention came outside the Chamber, in a committee room. Honda UK said it and its Swindon factory relied on 350 trucks a day arriving from Europe to maintain operations with just an hour’s worth of parts being held in reserve. A 15min delay costs the business £850,000.

Similar fears were echoed by Aston Martin and other members of the Society of Motor Manufacturers and Traders present with concerns ranging from import and export tariffs on goods and finished vehicles to threats that the EU will no longer recognise UK regulations.

This morning’s UK labor market release was a middle-of-the-road affair, with the bulk of the figures in line with expectations. What was slightly more promising was a sharp rise in productivity measures – a metric that’s been a blight on the UK’s economic record since the Global Financial Crisis.

The day ahead

The calendar for the rest of the session is relatively light, with focus still on the House and their progress on tax reform.

Have a great day.