The Australian Dollar underperformed in Asia Pacific trade, sinking in the wake of disappointing wage growth data. The Japanese Yen traded broadly higher as regional stocks followed Wall Street lower, boosting the appeal of the standby anti-risk currency. The British Pound corrected lower having rode the Euro’s coattails upward yesterday despite disappointing UK CPI statistics.

From here, a relatively muted European economic data docket is headlined by UK jobless claims figures. The release seems likely to pass without generating lasting currency-market follow-through considering its limited implications for near-term Bank of England policy.

The spotlight then turns to October’s US CPI report. The headline year-on-year inflation rate is expected to tick down to 2 percent after hitting a five-month high of 2.2 percent in September. US economic news-flow has increasingly improved relative to forecasts since mid-June, opening the door for an upside surprise.

Upbeat PPI statistics published yesterday seem to reinforce the possibility of a similar result on the CPI front, but PMI survey data offers a warning. Markit Economics said inflation in the service sector – by far the largest part of the economy – hit a six-month low last month. That doesn’t bode well for overall price growth.

Furthermore, with a Fed rate hike all but priced in already for December, it is possible that speculation about US tax reform and its impact on next year’s FOMC stance will overshadow the CPI report. The US Dollar may lose ground if the prospects for inflation-stoking tax cuts appear to unravel.

That seems like a plausible scenario after the Senate released a revised plan that effectively repeals the individual mandate to buy medical insurance – gutting so-called “Obamacare” – while the Congressional Budget Office (CBO) said the tax plans on offer can trigger $25 billion in cuts to Medicare next year.

Trying to repeal the Affordable Care Act (i.e. “Obamacare”) has been a lasting legislative frustration for the Trump administration this year. Three separate efforts have collapsed amid opposition from within Republican ranks. Tying tax reform to healthcare may see it meet the same fate.

Asia Session

European Session