You will wake up to three bits of good news. Domestically, inflation is soft: UK CPI was flat m/m and +1.7% y/y in September when it was expected to rise +0.1% m/m and +1.9% y/y. In Hong Kong, the government has decided to reduce liquor duties to 10% from 100% for imports over HK$200. In New Zealand, inflation is also weaker, as overnight the New Zealand CPI came out at -0.2% QoQ versus -0.1% expected, causing the currency to weaken.
On the other side of this equation, Chancellor Rachel Reeves has identified a £40bn funding gap, rather than the £22bn previously reported, ahead of her Budget in two weeks' time.
Ahead of the ECB decision tomorrow, I would like to draw your attention to the EUR. The currency opens at 1.0880, with the 200-day Moving Average at 1.0875. Despite Germany’s ongoing struggles with stagnation, the rise of far-right populism in the region, and France’s budgetary woes, the EUR is the third-best-performing G10 currency year-to-date, after GBP and USD. The decline in Eurozone HICP inflation to 1.8% y/y in September seemed to open the door to an October rate cut from the ECB, though services sector inflation remains elevated at 4%.
Consequently, even though German economic data have been disappointing and budget consolidation in France will almost certainly weigh on the country’s growth outlook, I do not expect the ECB to follow the Fed in considering a 50-bps rate cut in the foreseeable future. Indeed, the results of the ECB bank lending survey support the view that the ECB will continue to tread carefully. While the survey does not derail expectations for an October rate cut, the increase in demand for bank loans, albeit from a weak base, suggests that optimism about lower interest rates is already having a positive impact on confidence.
In other markets, Bitcoin rose 0.7% to $66,942.32, Ether rose 1.4% to $2,609.12, the yield on 10-year Treasuries opens at 4.03%, West Texas Intermediate crude rose 0.4% to $70.88 a barrel, and Spot gold rose 0.2% to $2,667.75 an ounce. Data-wise, it is quiet, but we do have Morgan Stanley earnings to look out for, and then it's over to the ECB tomorrow.
**For professional investors only** Any opinions, news, research, analyses, prices, or other information contained in this blog is provided as general market commentary and does not constitute (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. Some of this information may have been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation or warranty, expressed or implied, is made or given by or on behalf of iSAM Securities or its directors or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this blog, and no responsibility or liability is accepted for any such information. As a result, any person acting on any information does so entirely at their own risk. iSAM Securities will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
