The EU, the UK and Japan are all set to release their cost of living indicators this week including inflation data. In the past this data hasn’t caused all that much market movement, but in light of this years’ focus on inflation, the releases could be set to increase volatility, with traders speculating when current interest rates might change.
The UK’s release on Wednesday will be one of the most highly anticipated. With an expected annual Consumer Price Index (CPI) of around 2.7% all eyes will be on the pound’s market movements. Increasing in strength against the dollar, the pound recently hit its best levels since early August, marking a turn in trader sentiment and clawing back some of the losses GBP/USD has made since beginning April’s downward slide.
However, major changes to UK rates are not expected unless the inflation number is much high than expected. Traders could be waiting on the UK leaving the EU before the Bank of England will initiate any real changes.
Turning to stock markets, US stock markets remain stable. Last week’s 10-year anniversary marking the start of the 2008 financial crisis, which began with Lehman Brothers implosion, serves as a reminder that a crisis can always be just around the corner. But with the S&P 500 staying within 1% of its all-time high, traders for now seem happy to buy the dips at the first signs of any sell-off.