Headlines:
- UK September CPI +3.8% vs +4.0% y/y expected
- Sterling drops to one-week low after UK inflation data
- Traders increase BoE rate cut bets with the December meeting now seen as live
- Gold stumbles back lower in European morning trade
- ECB’s de Guindos: Current ECB interest rate level is adequate
- SNB Chairman Schlegel: US tariffs could increase downside risks for the economy
- Cannot say that Japan has exited deflation fully – finance minister Katayama
- US MBA mortgage applications w.e. 17 October -0.3% vs -1.8% prior
Markets:
- JPY leads, GBP lags on the day
- European equities mostly lower; S&P 500 futures flat
- US 10-year yields down 1.6 bps to 3.947%
- Gold down 2.4% to $4,023.19
- WTI crude oil up 2.0% to $58.42
- Bitcoin down 2.7% to $107,930
The main headline on the session came early on with UK inflation seen coming in softer than estimated in September. A rise in services inflation did not materialise and food price inflation was much softer, paving the way for the BOE to push for rate cuts sooner rather than later. And that’s precisely how markets responded as well.
The inflation numbers aren’t likely to be enough to change the outlook for November but a December rate cut is definitely plausible now. Traders moved to price those odds in, with the next full 25 bps rate cut seen for February 2026 and that is brought forward from March 2026 before the data.
In reaction, the pound fell with GBP/USD sliding from 1.3360 to a low of 1.3305 as sellers hold the near-term momentum for now. Besides that, other major currencies are more muted with 0.1% changes across the board among dollar pairs. Talk about a snoozefest, eh?
In other markets, stocks were also not up to much with European indices giving back some of the gains from yesterday with US futures also lacking any real conviction and appetite. Investors will be waiting on Tesla earnings after the close today for something to work with at least.
Once again though, precious metals continue to make the headlines with gold seen rebounding early on after the heavy slump in Asia. The precious metal moved up to a high of $4,161 after a low of $4,004 earlier in the day before falling back by over 2% now to $4,023. The volatility bouts are continuing to play out as sellers hold near-term control and hoping to try and break below the $4,000 mark.
The waiting game continues as we remain in the countdown zone ahead of US-China meetings as well as the Fed next week.
This article was written by Justin Low at investinglive.com.