UK inflation data in the spotlight as US in wait and see mood with FOMC

Both the FTSE and sterling are seen starting Tuesday on the front foot. The FTSE taking the lead from a positive finish in the US and Asia overnight. Meanwhile the pound ids finding itself supported at $1.3350 ahead of inflation data this morning

UK to stay steady at 3%? 

After Brexit developments being the main driver of the pound for what seems like an eternity, high impacting inflation figures, as measured by the consumer price index could offer a distraction. CPI is expected to remain steady at a five year high of 3% in November on an annual basis, and tick up marginally to 0.2% on a month on month basis, from 0.1% in October. Investors will be keen to see whether inflation has peaked or whether it still has further to climb. Should the figure tick higher, investors could assume that the Bank of England will be uneasy with the move higher and therefore it could increase the odds of an interest rate rise in 2018. 

GBPUSD is finding support at 1.3350. 

A strong inflation number could see the pair move back towards the key support at $1.34.  

The BoE is due to give a monetary policy decision on Thursday. Today’s figure is unlikely to change the decision, where the central bank id due to keep rates on hold. However, investors will be listening carefully to see how uncomfortable the central bank are with such a high level of inflation. 

Brent above $65 

Brent has continued to charge northwards this morning, adding to yesterday’s impressive gains and pushing the black stuff over $65 the barrel for the first time since 2015. This is Brent’s fourth straight positive session, which has seen Brent climb over $4.5 dollar since last Thursday. 

The principle pipelines in the North Sea has been closed for emergency repairs. This pipeline supports 40% of North Sea oil and gas production. This pipeline blip is occurring to the backdrop of the recently agreed OPEC supply cut extension, which is also offering support to oil prices. Given that the market have been given a timeline of a few weeks for the closure, there is a good chance that the resultant upside for Brent could be capped.

Investors play in safe ahead of FOMC 

US markets participants have been moving to the side-lines, opting not to take on new large positions ahead of the US FOMC. Yesterday saw the S&P and the Dow push slightly higher, reaching fresh record highs, but the trading session was not marked with the euphoria which usually accompanies new milestones being reached. Instead investors were playing it safe, ahead of Wednesday’s announcement. 

Whilst the FOMC are widely expected to keep rates on hold, investors are particularly interested as to what the Fed intends to do with rate rises over the next 12 months in the continued absence of decent inflation levels.