Pound Hits 1-Year High Against Dollar

Daily Analysis - 13/09/2017

Surprise UK Inflation Spike Boosts Sterling

The British pound soared to a one-year high of $1.3315 in early Wednesday trade after the Office for National Statistics reported that UK inflation rose to 2.90% in August. That compared with an annual rate of 2.60% in July while topping the 2.80% reading anticipated by a Wall Street Journal survey of analysts.

Bank of England Under Pressure to Tighten

Clothing and footwear prices in the UK increased 4.60% in August from a year ago - the steepest rate of increase since the statistical agency began monitoring the sector in 2006. The sharp rise in clothing prices was accompanied by an increase in petrol prices and higher hotel rooms rates while food prices and air fares witnessed small dips last month. The Bank of England’s Monetary Policy Committee is scheduled to meet this week to determine whether to hike interest rates. The Central Bank will publish its decision and the minutes of the meeting on Thursday. While no policy adjustments are expected, the stronger than forecast inflation figure could force a more hawkish statement from the bank. GBPUSD was last seen trading around 1.3305, with any break above the most recent high potentially accelerating buying pressure.

US Job Openings Touch Record High

Job openings in the United States rallied to a record high in July, indicating the labour market remained strong before the recent disruptive hurricanes. The Labor Department’s monthly Job Openings and Labor Turnover Survey released on Tuesday showed that job openings rose by 54,000 to a seasonally adjusted 6.20 million in July. This latest figure marked the highest reading since the data series began in December of 2000. Openings have now stayed above 6.00 million for two consecutive months.

Hirings grew 69,000 to 5.50 million, lifting the hiring rate to 3.80% from 3.70% in June. The tightness in the labour market was also underscored by a separate report from the National Federation of Independent Business, which ranked difficulty finding qualified workers as the “top business problem” of US small businesses in August. S&P 500 futures ended Tuesday at an all-time high of 2495.

Copper Prices Slide as Inventories Rise and Bulls Cut Long Positions

Copper prices slipped on Tuesday as stockpiles in London Metal Exchange warehouses rose and funds slashed their bets on higher prices for the metal. Copper inventories in LME approved warehouses surged 10,300 tonnes to 218,725 tonnes but continue to remain 40.00% below the yearly peak of 354,650 tonnes.

Sentiment was also hurt by data from the LME that showed money managers cut their net long copper position to 71,827 lots from a peak of 78,527 lots in late August. Base metals investors are looking ahead to industrial production data from key consumer China, due this week, for clues as to the strength of near-term demand. Copper futures for September delivery were last seen around the $3.0025-mark with $2.9980 marking the immediate support, a breach of which could see a bout of fresh selling.

New Zealand Food Prices Soar

Food price inflation in New Zealand rose in August, with butter, fruits, vegetables, and meat becoming more expensive from a year ago according to official data released by Statistics New Zealand overnight. On a seasonally adjusted monthly basis, the food price index climbed 0.20% last month, sending prices advancing 2.30% through the twelve months ended in August. Butter prices hit a record high of NZD$ 5.39 per block, surging 11.00% month over month and rallying by 62.00% from the same period a year prior.

The annual butter price rise is the largest in percentage terms since 2010. Considering food prices account for close to 19.00% of the consumer price index, which is the Reserve Bank of New Zealand's mandated inflation gauge, more pressure may be on institution to eventually raise rates. NZDUSD is gaining in Wednesday morning trade to currently hover around 0.7295.