UK and Eurozone inflation data on the cards for today

Roller coaster

The RBNZ kept its OCR unchanged in its latest policy decision earlier and after a wild ride, the kiwi is settling a little higher on the day in a bit of a surprise move.

The risk event was seen as a bit of a 50-50 based on what has been priced in and yet after an initial move lower, the kiwi has bounced back strongly to keep above 0.6900.

If anything, it underscores that confidence remains key and the market will still just about lap anything up as long as uncertainty is reduced/eliminated.

In this instance, the fact that NZ officials are stating that the latest COVID-19 outbreak is set to be limited to 50-100 cases and that RBNZ governor Orr stating that this merely delays the tightening cycle slightly seems to be doing the trick.

But it also reveals that this is a tough market to track as sentiment switches as quickly as a flip on a switch. Ugh.

I'm still not getting a feel of an outsized rally in the kiwi back to levels before all of the latest shenanigans but perhaps the currency may find a base and it seems to be doing so technically at the 0.6900 level, so keep a watchful eye on that.

Looking ahead, UK inflation data will continue to test the patience of the BOE but I'd still expect policymakers to brush it aside as transitory, likewise for the euro area and the ECB.

The dollar remains in a firm spot as Treasury yields show some signs of life, keeping higher on the day after yesterday's mild rebound. 10-year yields are at 1.276%, up 2 bps currently, despite a poorer US retail sales report yesterday. Go figure.

0600 GMT - UK July CPI figures

0600 GMT - UK July PPI figures

Prior release can be found here. UK inflation is estimated to keep thereabouts as seen in June, above the 2% target level and while this will continue to test the patience at the BOE, I'd expect policymakers to still brush all of this aside for now.

0900 GMT - Eurozone July final CPI figures

The preliminary report can be found here. With core inflation still more subdued, the ECB can still argue about 'transitory' inflation and the final reading today should just reaffirm that narrative for the time being.

1100 GMT - US MBA mortgage applications w.e. 13 August

Weekly US housing data, measures the change in number of applications for mortgages backed by the MBA during the week.

That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.