MARKET BRIEFING – LONDON OPEN 14.10.2015
According to data published yesterday by the Office for National Statistics, inflation dropped below zero. Although not a huge shock, the latest Consumer Price Index reports that inflation now stands at -0.1. This latest report places CPI data well below the Bank of England’s target of 2%. This would imply that the Governor of the Bank England, Mr. Mark Carney and his colleagues on the Monetary Policy Committee are now further away than ever in increasing the benchmark rate of interest.
For the ordinary person on the street of London and the rest of the United Kingdom, the drop off in inflation is not actually bad news. Deflation, however, is for many an economist is a nasty word. One only need to look at Japan which has suffered from deflation for over a decade.
However, the similarities between the Japanese and the United Kingdom’s economy are few and far between. The big difference being that of public debt, with the Japanese economy struggling to cope under a mountain off borrowings that equates to over 200% of GDP. The UK, on the other hand, has a much more manageable debt burden which is just under 90% of the country’s GDP.
Back in April of this year, inflation dropped beneath zero, however, since then, the level of CPI has hovered around 0.00%. This is not bad news for the average British citizen as this means that the cost of living has not risen. Additionally, average earnings in the UK have also risen and this has had the effect on making the majority of those in paid employment richer.
Prices in the UK have been pushed lower. The reason for this is due to the drop-off in the price of commodities such as Iron Ore, Copper and Tin. Furthermore, the glut in Crude Oil supply has also led to the cost of fuel and energy prices falling.
The well-publicized supermarket wars have also meant that the average price for the grocery basket is now lower than a year ago. The fall in food prices has coincided with the appreciation in the British Pound which has driven down the cost of food imports. A seasonal factor behind the decrease in food prices is due to good weather conditions creating an abundant supply of cheap food products.
With inflation flat lining, the pressure is now off the Bank of England to increase interest rates. The Bank of England’s is now predicting that inflation will reach 1% by the spring of 2016. It does seem a little optimistic that in a little under half a year that inflation will pick up by over 1%. Especially as news this morning out of the Far East, from the National Bureau of Statistics, indicated that Chinese CPI missed expectations by dropping to 1.6%
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1470
Target 2: 1.1284
Projected range in ATR’s: 0.0093
Daily control level: 1.1355
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5345
Target 2: 1.5150
Projected range in ATR’s: 0.0100
Daily control level: 1.5385
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 120.45
Target 2: 119.00
Projected range in ATR’s: 0.74
Daily control level: 120.35
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9660
Target 2: 0.9495
Projected range in ATR’s: 0.0083
Daily control level: 0.9645
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3135
Target 2: 1.2940
Projected range in ATR’s: 0.0100
Daily control level: 1.2900
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7325
Target 2: 0.7160
Projected range in ATR’s: 0.0081
Daily control level: 0.7380
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1189.45
Target 2: 1157.15
Projected range in ATR’s: 15.69
Daily control level: 1136.50
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 49.00
Target 2: 45.50
Projected range in ATR’s: 1.84
Daily control level: 50.55
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