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You can find the current article at its original source at http://www.theguardian.com/business/live/2017/aug/15/pound-steady-ahead-of-uk-inflation-data-business-live
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| Pound steady ahead of UK inflation data - business live | Pound steady ahead of UK inflation data - business live |
| (35 minutes later) | |
| 8.26am BST | |
| 08:26 | |
| 8.19am BST | |
| 08:19 | |
| The prospect of a deal between the UK and the EU to retain the key benefits of the customs union for a period following Brexit has also done little to lift the pound. Neil Wilson, senior market analyst at ETX Capital, said: | |
| Sterling didn’t budge much at all despite signs we may be in for a smoother Brexit. There was little to no uplift so far from the proposal for Britain to have a customs union with the EU for some years after the official Brexit date in 2019. | |
| The market is treating anything from London with due caution, rightly so given the open splits in the cabinet and precarious tenure of Theresa May. | |
| The real test comes when the third round of Brexit talks begin. If it flies with Michel Barnier and co it could be a lot more pound positive than we’re seeing now. There are also doubts about whether this would be palatable for the Brexit camp in parliament and among voters if it involves compromises on the divorce bill and the free movement of people. It also doesn’t address services, although it is a pretty good guide to what the government will pursue on that front. | |
| If you’re a pound bull this looks like a big step, and a signal that the softer transition side in government is winning the argument, but the sanguine response from the markets only highlights how far we have to go in the negotiation process. | |
| We’ve also got the CPI inflation data out at 09:30 that is keeping money on the side lines for the time being. A rise to 2.7% is expected which is not going to shift the dial on what the market expects from the Bank of England. It will have to be a big beat (which looks unlikely given the retreat last month) to get people talking up a rate hike this year again.” | |
| 8.15am BST | |
| 08:15 | |
| European markets open higher | |
| With the easing of tensions over North Korea, markets are edging higher at the open. | |
| Ahead of the UK inflation figures, the FTSE 100 has added 0.11% while Germany’s Dax opened 0.5% higher and France’s Cac and Spain’s Ibex are both up 0.4%. | |
| 8.09am BST | |
| 08:09 | |
| Here’s World First economist Jeremy Cook on the UK inflation figures and the possible effect on the pound: | |
| Gotta say that today’s UK CPI release, unless an absolute flyer, is likely to be negative sterling. Anything on consensus or slightly above | |
| is unlikely to prompt people to buy the pound if they believe that the Bank of England hasn’t got the stomach for a rate hike and any fall | |
| in inflation naturally takes the pressure off. Indeed, a very low number could be seen as a positive if it undoes some of the real wage pain | |
| 7.59am BST | 7.59am BST |
| 07:59 | 07:59 |
| German GDP continues to grow | German GDP continues to grow |
| The German economy grew by 0.6% in the second quarter, which is good news for Chancellor Merkel ahead of the forthcoming elections, even if the figure was slightly below forecasts. | The German economy grew by 0.6% in the second quarter, which is good news for Chancellor Merkel ahead of the forthcoming elections, even if the figure was slightly below forecasts. |
| The quarter on quarter rate was lower than a revised 0.7% figure for the first quarter and the forecast of a similar level for the second three months. | The quarter on quarter rate was lower than a revised 0.7% figure for the first quarter and the forecast of a similar level for the second three months. |
| The annualised rate of growth was 2.1%, up from 2% in the first quarter. This was well below the 4% recorded by Japan on Monday, but above the UK’s 1.7%. | The annualised rate of growth was 2.1%, up from 2% in the first quarter. This was well below the 4% recorded by Japan on Monday, but above the UK’s 1.7%. |
| The Federal Statistics Office said domestic demand grew but foreign trade slipped back: | The Federal Statistics Office said domestic demand grew but foreign trade slipped back: |
| The quarter-on-quarter comparison (upon adjustment for price, seasonal and calendar variations) shows that positive contributions came from domestic demand. Final consumption expenditure of both households and general government increased markedly... According to provisional calculations, the development of foreign trade, however, had a downward effect on growth because the price-adjusted quarter-on-quarter increase in imports was considerably larger than that of exports. | The quarter-on-quarter comparison (upon adjustment for price, seasonal and calendar variations) shows that positive contributions came from domestic demand. Final consumption expenditure of both households and general government increased markedly... According to provisional calculations, the development of foreign trade, however, had a downward effect on growth because the price-adjusted quarter-on-quarter increase in imports was considerably larger than that of exports. |
| Carsten Brzeski at ING Bank said: | Carsten Brzeski at ING Bank said: |
| The German economy continues its strong performance with another above-trend growth rate of 0.6% QoQ in 2Q 17. | The German economy continues its strong performance with another above-trend growth rate of 0.6% QoQ in 2Q 17. |
| Even in its ninth year, the German economic recovery is still going strong. GDP growth in the second quarter came in at 0.6% QoQ, from a slightly upwardly revised 0.7% QoQ in the first quarter of 2017. On the year, the German economy grew by 2.1%. | Even in its ninth year, the German economic recovery is still going strong. GDP growth in the second quarter came in at 0.6% QoQ, from a slightly upwardly revised 0.7% QoQ in the first quarter of 2017. On the year, the German economy grew by 2.1%. |
| The detailed growth components will only be released towards the end of the month but based on monthly data the economy continues firing on all cylinders. Growth was driven by public and private consumption, investment and the construction sector. | The detailed growth components will only be released towards the end of the month but based on monthly data the economy continues firing on all cylinders. Growth was driven by public and private consumption, investment and the construction sector. |
| Germany’s economic success story goes on and on and on. And there is very little reason to fear a sudden end to the current performance, even though some kind of slowdown from current growth rates looks almost inevitable. The drivers supporting the domestic economy, like record high employment, higher wages and government consumption, might lose some momentum along the way, without turning negative. The same holds for the export sector, where a stronger euro, weaker-than-expected US growth and Brexit uncertainty could take some wind out of the sails without bringing exports to a halt. | Germany’s economic success story goes on and on and on. And there is very little reason to fear a sudden end to the current performance, even though some kind of slowdown from current growth rates looks almost inevitable. The drivers supporting the domestic economy, like record high employment, higher wages and government consumption, might lose some momentum along the way, without turning negative. The same holds for the export sector, where a stronger euro, weaker-than-expected US growth and Brexit uncertainty could take some wind out of the sails without bringing exports to a halt. |
| While the current growth drivers could lose some momentum, investments could emerge as the new engine going into the second half of the year and beyond. Since the small setback at the turn of the year, production expectations have increased continuously. Order books are filled again and inventories have been reduced. Capacity utilisation in the manufacturing industry has also increased continuously since mid-2016 and is now clearly above its historical average. A combination which under normal circumstances should be a safe bet for stronger investments. | While the current growth drivers could lose some momentum, investments could emerge as the new engine going into the second half of the year and beyond. Since the small setback at the turn of the year, production expectations have increased continuously. Order books are filled again and inventories have been reduced. Capacity utilisation in the manufacturing industry has also increased continuously since mid-2016 and is now clearly above its historical average. A combination which under normal circumstances should be a safe bet for stronger investments. |
| With today’s strong growth data, it will be hard for any opposition party to pick out the economy as a main theme for the final stage of the election campaign. Even Angela Merkel’s junior coalition partner, the social-democratic SPD, finds it hard to get the credits from the electorate for the current strong growth performance. When it comes to the economy, it seems as if Angela Merkel sits in a “winner-takes-it-all” position. The lack of new structural reforms or the lack of investments (both in traditional and digital infrastructure) has so far not affected voters’ preferences. | With today’s strong growth data, it will be hard for any opposition party to pick out the economy as a main theme for the final stage of the election campaign. Even Angela Merkel’s junior coalition partner, the social-democratic SPD, finds it hard to get the credits from the electorate for the current strong growth performance. When it comes to the economy, it seems as if Angela Merkel sits in a “winner-takes-it-all” position. The lack of new structural reforms or the lack of investments (both in traditional and digital infrastructure) has so far not affected voters’ preferences. |
| All in all, the German economy is still thriving and currently the biggest risk is probably policy complacency. Still, it looks increasingly unlikely that economic topics will decide the upcoming elections. | All in all, the German economy is still thriving and currently the biggest risk is probably policy complacency. Still, it looks increasingly unlikely that economic topics will decide the upcoming elections. |
| 7.31am BST | 7.31am BST |
| 07:31 | 07:31 |
| After last week’s market turmoil caused by North Korea and the US being at loggerheads, an easing of the tensions between the two countries has seen a sense of calm return. Not only does North Korea appear to be toning down some of the belligerent rhetoric, but China has stepped in to comply with UN sanctions against the country. | After last week’s market turmoil caused by North Korea and the US being at loggerheads, an easing of the tensions between the two countries has seen a sense of calm return. Not only does North Korea appear to be toning down some of the belligerent rhetoric, but China has stepped in to comply with UN sanctions against the country. |
| So after Monday’s gains, markets are expected to move higher again at the open: | So after Monday’s gains, markets are expected to move higher again at the open: |
| Our European opening calls:$FTSE 7374 +0.28%$DAX 12219 +0.44%$CAC 5141 +0.39%$IBEX 10507 +0.43%$MIB 21785 +0.29% | Our European opening calls:$FTSE 7374 +0.28%$DAX 12219 +0.44%$CAC 5141 +0.39%$IBEX 10507 +0.43%$MIB 21785 +0.29% |
| 7.25am BST | 7.25am BST |
| 07:25 | 07:25 |
| Agenda: UK inflation figures and US retail sales in focus | Agenda: UK inflation figures and US retail sales in focus |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| A busier day for economic figures sees the release of UK inflation data and US retail sales figures for July. | A busier day for economic figures sees the release of UK inflation data and US retail sales figures for July. |
| We’ve already had German GDP figures, which have come in slightly below expectations (more shortly.....) | We’ve already had German GDP figures, which have come in slightly below expectations (more shortly.....) |
| On the UK inflation front, the consumer price index is expected to edge up from 2.6% year on year to 2.7& after a surprise fall in June. Michael Hewson, chief market analyst at CMC Markets UK, said: | On the UK inflation front, the consumer price index is expected to edge up from 2.6% year on year to 2.7& after a surprise fall in June. Michael Hewson, chief market analyst at CMC Markets UK, said: |
| When the last set of inflation numbers were released in June they showed a sharp fall in headline CPI from 2.9% to 2.6%, a welcome decline at a time when consumers have been feeling an increasing squeeze on their incomes. This fall raised hopes that inflation may well have peaked and today’s July CPI numbers could well go further in reinforcing that belief, though most expectations are for a tick back higher to 2.7%, while core CPI is also expected to rise to 2.5% from 2.4%. | When the last set of inflation numbers were released in June they showed a sharp fall in headline CPI from 2.9% to 2.6%, a welcome decline at a time when consumers have been feeling an increasing squeeze on their incomes. This fall raised hopes that inflation may well have peaked and today’s July CPI numbers could well go further in reinforcing that belief, though most expectations are for a tick back higher to 2.7%, while core CPI is also expected to rise to 2.5% from 2.4%. |
| A rise would be at odds with the recent softening in recent PPI numbers, which have slipped from 20% at the beginning of the year and could come in as low as 6.9% in today’s July numbers, but in line with the Bank of England’s forecasts which suggest we could see 3% before year end. | A rise would be at odds with the recent softening in recent PPI numbers, which have slipped from 20% at the beginning of the year and could come in as low as 6.9% in today’s July numbers, but in line with the Bank of England’s forecasts which suggest we could see 3% before year end. |
| Despite the Bank’s recent dovishness regarding interest rates, any increase could put that conviction to the test. But with the pound steady at $1.2963, the market clearly believes there is no hurry for the next rate rise. | Despite the Bank’s recent dovishness regarding interest rates, any increase could put that conviction to the test. But with the pound steady at $1.2963, the market clearly believes there is no hurry for the next rate rise. |
| Meanwhile the retail price index - expected to come in at 3.5% - will be of particular interest to Britain’s train passengers (which, let’s face it, is most of us at one point or another.) For some reason the July RPI is used to calculate rail fare increases which come into effect in January, so prepare for further hikes. | Meanwhile the retail price index - expected to come in at 3.5% - will be of particular interest to Britain’s train passengers (which, let’s face it, is most of us at one point or another.) For some reason the July RPI is used to calculate rail fare increases which come into effect in January, so prepare for further hikes. |
| Here’s our preview of the inflation figures: | Here’s our preview of the inflation figures: |
| Elsewhere we get US retail sales figures later which could show a pick-up in consumer spending after an underwhelming second quarter. | Elsewhere we get US retail sales figures later which could show a pick-up in consumer spending after an underwhelming second quarter. |
| The agenda: | The agenda: |
| 9.30 BST: UK inflation figures | 9.30 BST: UK inflation figures |
| 1.30 BST: US retail sales | 1.30 BST: US retail sales |